2022 (11) TMI 1004 - AT - Service Tax

Interest on refund not sanctioned - case of Revenue is that Since the refund has been sanctioned within three months thereof that interest was not to be paid - HELD THAT - It is observed that the amount of refund claimed was applied and has been sanctioned for the amount of pre-deposit as was deposited by the appellant pursuant to the directions of the Court. It is also observed that till date the liability of the appellant as was proposed vide three separate show cause notices of 22.10.2009, 22.10.2010 and 20.02.2011 has yet not finalised. The Original Adjudicating Authority has yet to adjudicate the same pursuant to the directions by the Tribunal to decide the matter afresh in line with the decision of Hon ble Apex Court in the case of COMMISSIONER, CENTRAL EXCISE CUSTOMS VERSUS M/S LARSEN TOUBRO LTD. AND OTHERS 2015 (8) TMI 749 - SUPREME COURT and also the decision of this Tribunal in the case of M/S BHAYANA BUILDERS (P) LTD. OTHERS VERSUS CST, DELHI OTHERS. 2013 (9) TMI 294 - CESTAT NEW DELHI (LB) . Perusal makes it abundantly clear that amount in question of above facts is not yet held as the liability of the appellant. The department has no authority to retain such amount which otherwise is the amount of pre-deposit. Another fact of the present case is that pursuant to the said order application for refund was filed on 14.3.2019. It is held 14.3.2019 as the relevant date from which the calculation of interest be made - the adjudication of duty demand has yet not been finalized. In the given circumstances, Section 35FF has wrongly been invoked by Commissioner (Appeals). In view of entire above discussion, the order under challenge is hereby set aside, consequent thereto the appeal stands allowed holding the appellant entitled for the interest on the amount of Rs.14,15,694/- @12 per cent to be sanctioned to the appellant from the date of application for refund i.e. 14.03.2019 till the payment thereof. Appeal allowed.

Summary

Issues:
1. Refund claim sanctioned without interest.
2. Application of Section 35FF.
3. Entitlement to interest on refund amount.

Analysis:
1. The appeal was filed to challenge the Order-In-Appeal sanctioning a refund claim of Rs.14,15,694/- without interest. The appellant, registered for providing taxable construction services, filed the refund claim based on three show cause notices demanding service tax. The matter went through various orders and appeals, with the Tribunal directing a re-decision based on specific court and tribunal decisions. The appellant subsequently filed a refund claim for the pre-deposit amount, which was initially rejected but later sanctioned without interest. The appellant contended that the amount was not towards duty liability, as the issue was still under adjudication, and interest should be awarded. The Department argued that interest was not due as the refund was sanctioned within three months of the relevant date. The Tribunal held that the amount in question was not yet determined as the appellant's liability, and the Department had no authority to retain the pre-deposit amount, ruling in favor of the appellant's entitlement to interest on the refund amount from the date of the refund application.

2. The appellant argued that Section 35FF was wrongly invoked by the Commissioner (Appeals), citing a relevant case law. The Department contended that interest was not payable as the refund was sanctioned within the prescribed period. The Tribunal analyzed the application of Section 35FF in the context of the case, considering the date of the Final Order and the relevant date for interest calculation. It concluded that the Commissioner (Appeals) had incorrectly applied Section 35FF, leading to the setting aside of the order and allowing the appeal with the appellant entitled to interest on the refund amount from the date of the refund application.

3. The Tribunal emphasized the concept of unjust enrichment applying to both the assessee and the Department, citing relevant case laws. It determined the relevant date for interest calculation based on the Final Order date and the date of the refund application. Relying on previous decisions and the arguments presented, the Tribunal held the appellant entitled to interest at a specified rate on the refund amount from the date of the refund application until payment, ultimately allowing the appeal in favor of the appellant.