2022 (10) TMI 880 - HC - Service Tax

Claim of interest on Refund - Demand of service tax was set aside in the appellate proceedings - Calculation of interest for the period from the date the amounts were actually paid to the Government account, is correct or not - HELD THAT - The Commissioner (Appeals) relying on the notification issued exempting payment of service tax allowed the appeal. It is on 21.11.2013 that the declaration is given that the appellant is not entitled to pay any service tax. Hence, any interest to be worked out on the refund has to be only from that day onwards. The appellant cannot contend that when a refund application is allowed, the interest has to be worked out from the date on which the service tax was actually paid into the Government. In fact Section 11BB and Section 11B of Central Excise Act 1944 deals with refund. It specifically states that the claim of interest on refund liability of the revenue to pay interest commences from the date of expiry of the 3 months from the date of receipt application for refund under Section 11B(1) of the Act and not on the expiry of the period from the date on which the order of refund is made. The Tribunal by the impugned order has held that the liability to pay interest on the amount of refund starts from the date on which the declaration was made that the appellant is not liable to pay service tax and declared that the appellant is entitled for interest from the date of order in original dated 21.11.2013 onwards. The appellant is entitled for interest on the refund made only from the date on which the original order was passed declaring that the appellant is not liable to pay service tax - Appeal disposed off.

Summary

Issues:
1. Refund of service tax claimed by the appellant.
2. Rejection of refund application as time-barred.
3. Entitlement to interest on the refunded amount.

Analysis:
1. The appellant, a Commission agent dealing in cashew nuts and kernels, was registered with the Service Tax department under 'business auxiliary service.' A show cause notice was issued for undeclared income, which was later challenged and resolved in favor of the appellant. Subsequently, a refund application was filed, which was rejected as time-barred. The appellant appealed against this rejection, leading to a series of legal proceedings culminating in the CESTAT's decision to grant the refund. However, the issue of interest on the refunded amount remained contentious.

2. The rejection of the refund application as time-barred was a key issue. The original authority rejected the refund application citing time limitations under section 11B of the Central Excise Act. The Commissioner of Appeals upheld this decision, leading the appellant to approach CESTAT Bangalore. CESTAT, after considering the appellant's protest and evidence of non-collection of service tax from recipients, deemed the rejection as unsustainable in law. The appellant was then granted a refund of the service tax paid, albeit without any interest.

3. The appellant subsequently sought interest on the refunded amount, which was initially denied by the Deputy Commissioner citing compliance with the 3-month refund sanction period under section 11B of the Act. The Commissioner Appeals, however, allowed the appeal and ordered interest to be paid after 3 months from the date of the refund application. The appellant, dissatisfied with the interest amount sanctioned, approached CESTAT again. CESTAT found the original order lacking in granting interest under Section 11BB, emphasizing the importance of following higher appellate authority orders. The appellant's entitlement to interest from the date of the first appeal was upheld, leading to the setting aside of the previous order.

In conclusion, the judgment addressed the issues of refund application rejection, entitlement to interest on the refunded amount, and compliance with statutory provisions under the Central Excise Act. The appellant's journey through various legal forums ultimately resulted in the successful claim for both the refund and the interest on the refunded service tax amount.