2019 (11) TMI 251 - AT - Service Tax

Refund of service tax - certain services received and used for export of goods - N/N. 41/2007-ST dated 06.10.2007 - period from April 2008 to June 2008 - HELD THAT - Present is the case where the appellant had filed refund claims in respect of service tax paid on certain services received and used for the export of goods during the period from April, 2008 to June, 2008. The refund claims were accordingly filed on 29.08.2008 29.06.09. The provision makes it, abundantly, clear that the interest is allowed on delayed refunds. But the provision is silent about any interest on delayed payment of interest as claimed herein. Learned Counsel for appellant has relied upon Sandvik Asia Ltd. (Supra) case, impressing upon that the Hon ble Apex Court has allowed such amount in case of apparent delay. But it is observed that there has been expressed clarification that such interest only can be claimed by an assessee which is provided under the statute and no other interest on such statutory interest can be granted. The first argument of the appellants that they are entitled for interest on interest being compensatory in nature is not sustainable. Since, it technically is interest on interest it cannot be called as compensation suo moto, nor has been so prayed by the appellant himself - Decided in favor of Revenue - decided in favor of Revenue. The alternate argument of the Appellant that from the amount of refund sanctioned since there is an interest liability, the amount should be first adjusted towards the interest liability - HELD THAT - It is observed that this rule of first appropriating the interest is applicable only to the debts or to the decreetal amount. The case law as relied upon by the appellant is also either qua debts or qua the decreetal amount. Hence, the same is not applicable to the present case of refund of indirect taxes. The said rule of interpretation is otherwise contained in order-21 Rule-1 of Civil Procedure Code relating to execution of decrees for recovery of money. Such a provision stands absolutely excluded from the Central Excise Act, 1944 - the second line of argument of Appellant is also opined not applicable to the given set of facts circumstances. Appeal dismissed.

Summary

Issues Involved:
1. Entitlement to interest on delayed refund claims.
2. Entitlement to interest on delayed payment of interest.
3. Rate of interest applicable on delayed refunds.
4. Adjustment of refunded amount towards interest liability first.

Detailed Analysis:

1. Entitlement to Interest on Delayed Refund Claims:
The appellant filed refund claims for service tax paid on services used for export of goods for the period from April 2008 to June 2008. These claims were initially rejected but were later affirmed by the Tribunal and remanded for re-examination. The refund claims were sanctioned in 2015 but without interest from the date of filing. The Commissioner (Appeals) later sanctioned interest from the date of receipt of the application for refund, not from the date of filing.

2. Entitlement to Interest on Delayed Payment of Interest:
The appellant sought interest on the delayed payment of interest, arguing that interest is compensatory in nature and citing the Supreme Court's decision in Sandvik Asia Ltd. vs. CIT. However, the Tribunal noted that the provision under Section 11BB of the Central Excise Act, 1944, does not provide for interest on delayed payment of interest. The Tribunal clarified that the Supreme Court in Sandvik Asia Ltd. did not grant interest on interest but rather compensation for inordinate delay, which is not within the Tribunal's power to grant.

3. Rate of Interest Applicable on Delayed Refunds:
The appellant initially sought interest at 12.5% on the refund amount but was sanctioned interest at a statutory rate of 6%. The Tribunal upheld the statutory rate, noting that the relevant provision prescribes a rate not below 10% and not exceeding 30% per annum, as fixed by the Board. The Tribunal emphasized that only the interest provided under the statute can be claimed, and no additional interest on such statutory interest is permissible.

4. Adjustment of Refunded Amount Towards Interest Liability First:
The appellant argued that the refunded amount should first be adjusted towards the interest liability and then towards the principal amount. The Tribunal rejected this argument, stating that the rule of first appropriating the interest applies only to debts or decreetal amounts, which is not applicable to the present case of refund of indirect taxes. The Tribunal referenced the Civil Procedure Code and clarified that this provision is excluded from the Central Excise Act, 1944.

Conclusion:
The Tribunal dismissed the appeals, holding that the appellant is not entitled to interest on the delayed payment of interest and that the statutory rate of interest on delayed refunds is applicable. The Tribunal also rejected the argument for adjusting the refunded amount towards interest liability first, affirming that such a rule is not applicable in the context of indirect tax refunds. The orders under challenge were upheld, and the appeals were dismissed.