2023 (4) TMI 433 - AT - Service Tax

Interest on refund claim - from which date the interest is payable in the case of the amount deposited during investigation - from the date of deposit till its realization with 12% interest or not - HELD THAT - This issue has been considered by the Tribunal in various cases and it has been consistently held that the assessee is entitled to claim interest from the date of deposit till the date of payment at the rate of 12%. Further, this Tribunal in the case of COMMISSIONER OF CENTRAL EXCISE, PANCHKULA VERSUS M/S RIBA TEXTILES LIMITED 2022 (3) TMI 693 - PUNJAB HARYANA HIGH COURT after considering the various decisions held that the assessee is entitled to claim interest from the date of payment of initial amount till the date of its refund and further the Tribunal relied upon the decision of Kerala High Court as well as the decision of the Ahmadabad Tribunal and thereafter granted the interest of 12% per annum. The arguments of the Revenue that M/S PARLE AGRO PVT. LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE, NOIDA 2017 (2) TMI 984 - CESTAT ALLAHABAD has been challenged before the Hon ble Allahabad High Court and the appeal has been admitted will not help the Revenue in any way as no stay has been granted against the said decision. Further, the main thrust of the argument of the Ld. DR that in the present case the duty has been deposited voluntarily and not under protest also does not have any force because consistently it has been held that any amount that is deposited during pendency of the adjudication proceedings or investigation is in the nature of deposit made under protest as held by the Madras High Court in the case of THE COMMISSIONER OF CENTRAL EXCISE, COIMBATORE VERSUS M/S. PRICOL LTD., THE CUSTOMS, EXCISE SERVICE TAX APPELLATE TRIBUNAL 2015 (3) TMI 735 - MADRAS HIGH COURT ,COMMISSIONER, CENTRAL EXCISE 7-A, ASHOK MARG, LUCKNOW VERSUS M/S EVEREADY INDUSTRIES INDIA LTD. 2017 (2) TMI 197 - ALLAHABAD HIGH COURT and GUJARAT ENGINEERING WORKS VERSUS COMMR. OF C. EX., AHMEDABAD-II 2013 (5) TMI 599 - CESTAT AHMEDABAD . The appellant is entitled to claim interest on delayed refund from the date of deposit till the date of payment at the rate of 12% per annum - Appeal allowed.

Summary

Issues Involved:
1. Entitlement to interest on the refund amount.
2. Rate of interest applicable for delayed refund.

Summary:

Entitlement to Interest on Refund Amount:
The appellant, engaged in providing recovery agent services, was under the impression that service tax liability was being discharged by telecom companies on a reverse charge basis. The department, however, concluded that the appellant had short-paid service tax and issued a show cause notice demanding Rs. 49,94,022/- along with penalties. The Tribunal, in a prior order, ruled that the extended period of limitation was not invocable and set aside the penalties. Consequently, the appellant sought a refund of Rs. 22,81,472/-, which was sanctioned without interest. The department later amended the refund order, declaring no refund was payable. This amendment was challenged and overturned by the Tribunal, which restored the original refund order. The appellant's subsequent appeal for interest on the refund was rejected, leading to the present appeal.

Rate of Interest on Delayed Refund:
The appellant argued that interest on the delayed refund should be payable from the date of deposit until realization at a rate of 12%, citing multiple judicial precedents. The department countered that the amount paid was duty and not a revenue deposit, and thus, interest should be governed by Section 35FF of the Central Excise Act, 1945, which prescribes interest only if the refund is delayed beyond three months from the appellate order. The department also argued that the amount was paid voluntarily without protest, distinguishing it from pre-deposits.

Tribunal's Decision:
The Tribunal held that the appellant is entitled to interest on the delayed refund from the date of deposit until the date of payment at a rate of 12% per annum. This conclusion was based on consistent judicial precedents, including decisions by the Kerala High Court and Ahmedabad Tribunal, which treated amounts deposited during investigations as made under protest. The Tribunal also noted that the decision in Riba Textiles Ltd., which granted 12% interest on delayed refunds, was upheld by the Punjab and Haryana High Court, making it binding.

Conclusion:
The impugned order was set aside, and the appeal was allowed, granting the appellant interest at 12% per annum on the delayed refund from the date of deposit until payment.

(Order pronounced in the open court on 06.04.2023)