2022 (3) TMI 751 - AT - Service Tax

Entitlement of interest on refund claim - refund sought was of amount of pre-deposit - effect of amendment in Section 35FF of Finance Act - rate of interest - whether Section 35FF pre-amendment will be applicable to the present case or Section 35FF post-amendment? - HELD THAT - The perusal of Section 35FF makes it clear that prior 2014, the assesse used to be entitled for interest upon the amount of refund of amount of pre-deposit if and only if, the refund was not used to sanction within a period of three months. However, post Finance Act, 2014, the amendment Section 35F makes assesse always entitled for interest at the rate of not less than fifty per cent and not more than thirty six per cent per annum on the amount deposited by the assesse/appellant under Section 35F. The proviso to amended Section 35FF makes it clear that the un-amended provision shall continue to apply to the amounts deposited under Section 35F prior to the commencement of Finance Act, 2014. In the present case, the appellant filed an appeal before this Tribunal against Order-in-Original dated 30th September, 2013 apparently the amount as required under Section 35F to be deposited while filing such appeal was deposited by the appellant vide Challan No.61692 dated 06.10.2015. This particular perusal makes it abundantly clear that the amount of pre-deposit under Section 35F of Central Excise Act, 1944 was made after the amendment introduced vide Finance Act, 2014. Hence, the case of the appellant goes out of the scope of proviso to the amended provision and it shall be amended Section 35FF and not the erstwhile Section 35FF which shall be applicable to the deposit in question. Rate of Interest - HELD THAT - The amount in question is not an amount of duty but was an amount paid by way of deposit under Section 35F for availing the remedy of an appeal. The appeal has been allowed. Such an amount is bound to be refunded along with the appropriate consequential relief as that of interest - the reasonable rate of interest in the given facts and circumstances is the rate at twelve per cent. Hence, the request of the appellant is accepted with respect to rate of interest also. Appeal allowed.

Summary

Issues:
1. Entitlement to interest on sanctioned refund of pre-deposit.
2. Applicability of Section 35FF pre-amendment or post-amendment.
3. Rate of interest on the pre-deposit amount.

Analysis:

Issue 1: Entitlement to Interest on Sanctioned Refund of Pre-Deposit
The case involved M/s Elegant Developers engaged in Real Estate Agent Services. A show cause notice was issued proposing a demand, interest, and penalty, which was confirmed by the original Adjudicating Authority. However, the Tribunal set aside the original order. The appellant filed a refund claim for the pre-deposit amount, which was sanctioned with interest. The Department appealed against the interest component, leading to the current appeal before the Tribunal. The appellant argued that the pre-deposit was unauthorizedly held by the Department and not a duty payment, thus entitled to interest. The Tribunal agreed, citing relevant case law and held the appellant entitled to interest at 12%.

Issue 2: Applicability of Section 35FF Pre-Amendment or Post-Amendment
The Tribunal analyzed the pre and post-amendment provisions of Section 35FF of the Central Excise Act. Pre-amendment, interest was payable if the refund was not sanctioned within three months. Post-amendment, interest was mandatory on the deposited amount. The Tribunal noted that the appellant's pre-deposit was made after the 2014 amendment, making the post-amendment Section 35FF applicable. The Commissioner (Appeals) erred in relying on the pre-amendment provision, leading to the decision to set aside the Order-in-Appeal.

Issue 3: Rate of Interest on the Pre-Deposit Amount
The original Adjudicating Authority awarded interest at 5%, the lowest rate in the amended Section 35FF. The Tribunal, considering the compensatory nature of interest, increased the rate to 12% based on relevant case law. The Tribunal held that the appellant should be reasonably compensated from the date of payment, and the original Adjudicating Authority provided no justification for applying the lowest rate. Consequently, the Tribunal allowed the appeal, sanctioning the refund of the pre-deposit amount with interest at 12%.

In conclusion, the Tribunal set aside the Order-in-Appeal, holding the appellant entitled to the refund of the pre-deposit amount with interest at 12%.