2023 (6) TMI 411 - HC - Central Excise

Payment of interest under Section 35FF of Central Excise Act, 1944 - HELD THAT - In the facts of the present case, the petitioner deposited a sum of Rs. 43,75,786 which includes a sum of Rs. 24,39,600/- on the referral services. The tax was deposited during investigation. It is not in dispute that the Tribunal vide order dated 16.03.2018 allowed the appeal of the assessee and the petitioner was not held liable to pay service tax on referral services. Hence the petitioner is entitled to refund of Rs. 24,39,600/- along with interest. The amount was deposited during investigation in the year 2018. The show cause notice was issued on 20.10.2014 after conducting investigation. Hence, the petitioner is entitled for refund from the date of deposit of the amount since the date of investigation. The present petition is allowed and direction is given to the respondents to refund the mentioned amount ie. Rs. 24,39,600/- along with interest @9% w.e.f October, 2014 till the payment is made.

Summary

Issues involved:
The issues involved in this case are the entitlement to interest under Section 35FF of the Central Excise Act, 1944, refund claim, applicability of judgments related to interest on delayed refunds, and the liability to pay service tax on referral services.

Entitlement to Interest under Section 35FF:
The petitioner sought a writ in the nature of mandamus for the sanction of a refund of Rs. 24,39,600/- along with interest under Section 35FF of the Central Excise Act, 1944. The respondents contended that the petitioner did not deposit any amount under Section 35F of the Act and, therefore, was not entitled to interest. The respondents argued that the petitioner's claim for interest was declined as the amount was deposited before the substitution of Section 35FF in 2014. However, the petitioner argued that the refund claim was processed after furnishing the required documents and that the Tribunal had already allowed the appeal, stating that the petitioner was not liable to pay service tax on referral services.

Applicability of Judgments on Interest on Delayed Refunds:
The petitioner referred to the judgment in Riba Textile Ltd vs. Commissioner of CE and ST, Panchkula, where it was held that the appellant was entitled to claim interest on delayed refunds. Additionally, the petitioner cited the judgment in the case of Sandvik Asia Ltd vs. CIT, Pune, where it was established that interest on delayed refunds is claimable from the date of deposit until realization. The Court considered these judgments and applied the principles to the present case, ruling in favor of the petitioner's entitlement to interest.

Liability to Pay Service Tax on Referral Services:
The petitioner had deposited a sum of Rs. 43,75,786 during the investigation, which included Rs. 24,39,600/- for referral services. The Tribunal allowed the appeal, stating that the petitioner was not liable to pay service tax on referral services. The Court, in line with this decision, directed the respondents to refund the amount of Rs. 24,39,600/- along with interest at the rate of 9% from October 2014 until the payment is made.