2021 (8) TMI 990 - AT - Service Tax

Interest on delayed refund of amount - the amount was paid during the investigation under protest as pre-deposit - HELD THAT - It is an amount paid by the appellant as service tax under protest during the course of investigation. This fact is not in dispute. When any amount paid under protest, it is neither pre-deposit nor service tax; it is only a deposit made by the appellant and the said amount was retained by the Revenue without any authority of law as held by this Tribunal that the appellant was not liable to pay service tax. The order of this Tribunal has attained finality. The appellant is entitled to claim interest from the date of deposit till its realization - Considering it is a pre-deposit but the appellant is entitled to claim interest on the said amount as the said amount has been paid under protest from its payment till its realization @12 % p.a. - Appeal allowed.

Summary

Issues:
1. Entitlement to interest on amount paid under protest during investigation.
2. Determination of whether the amount paid was a pre-deposit or service tax.

Analysis:

Issue 1: Entitlement to interest on amount paid under protest during investigation
The appellant, an exporter of readymade garments, paid certain amounts under protest during an investigation in 2007 regarding service tax on commission paid to agents. Subsequently, a show cause notice was issued in 2009, leading to a demand being confirmed. However, the Tribunal later held that the appellant was not liable to pay service tax. The appellant then sought a refund, which was granted, but interest on the delayed refund was not provided. The appellant contended that they were entitled to interest from the date of deposit till realization at a rate of 12%, as the amount was paid under protest and retained by the Revenue without legal authority. The Tribunal agreed, stating that when an amount is paid under protest, it is not a pre-deposit or service tax but a deposit, entitling the appellant to claim interest.

Issue 2: Determination of whether the amount paid was a pre-deposit or service tax
The appellant argued that the amount paid under protest was not a pre-deposit but service tax, while the Revenue contended that it was a deposit. The Tribunal clarified that the amount paid under protest during the investigation was not a pre-deposit or service tax but a deposit, as confirmed by its earlier order holding the appellant not liable to pay service tax. As such, the Tribunal deemed the impugned order granting 10% interest to be unsustainable in law and allowed the appeal, granting the appellant interest on the amount paid under protest at a rate of 12% per annum until realization.

In conclusion, the Tribunal ruled in favor of the appellant, emphasizing their entitlement to interest on the amount paid under protest during the investigation period. The judgment clarified the nature of the payment as a deposit and not a pre-deposit or service tax, leading to the appellant's successful appeal and the grant of interest at the specified rate until realization.