2016 (6) TMI 620 - AT - Service Tax

Claim of refund of interest and penalty paid earlier - whether the Appellant would be eligible for interest on penalty of ₹ 78,763/- and interest on interest of ₹ 2,03,472/- which was paid pursuant to the OIO and whether the rate of interest would be 6% or 12% p.a. - Held that - Larger Bench of the Tribunal in the case of Advance Mechanical Works 2004 (12) TMI 107 - CESTAT, MUMBAI , after referring to the judgment of Hon ble Supreme Court on the subject held that interest is not payable on penalty amount and also on the interest paid subsequent to the Adjudication order. Interest @ 6% on the delayed refund as per the relevant notification would only be admissible. - Decided against the assessee.

Summary

Issues:
Claim for interest on penalty and interest on interest paid, Applicability of interest rate, Eligibility for interest on delayed refund, Interpretation of relevant notifications and judgments.

Analysis:
The appeal was filed against an order passed by the Commissioner (Appeals) regarding the refund of Service Tax, interest, and penalty. The Appellant became eligible for a refund after the appeal was partly allowed. Subsequently, the Appellant claimed interest on the delayed refund amount. The Adjudicating authority sanctioned a partial interest amount, which led to the appeal before the Commissioner (Appeals) and eventually to the present appeal.

The main issue raised was whether the Appellant would be entitled to interest on the penalty and interest paid, and at what rate. The Authorised Representative for the Revenue argued that interest was not payable on the penalty and interest amount, citing a judgment of the Larger Bench of the Tribunal in a specific case. The contention was that interest @ 6% was allowed on the delayed refund based on a notification issued under the Central Excise Act.

Upon reviewing the case records and submissions, the Tribunal referred to the judgment of the Larger Bench and another case law to determine the eligibility for interest on penalty and interest paid. The Tribunal held that interest is not payable on penalty amounts and interest paid post the Adjudication order. Additionally, it was established that interest @ 6% on the delayed refund, as per the relevant notification, was the only admissible rate. Relying on these precedents, the Tribunal found no merit in the appeal and upheld the order of the Commissioner (Appeals), ultimately dismissing the appeal.

In conclusion, the Tribunal's decision was based on the interpretation of relevant judgments and notifications, which clarified the inadmissibility of interest on penalty and post-Adjudication interest paid, as well as the applicability of a 6% interest rate on delayed refunds. The appeal was dismissed accordingly.