2024 (10) TMI 326 - AT - Service Tax

Interest claim - refund of amount deposited under protest without paying interest - HELD THAT - Undisputedly appellant is entitled to interest on the amounts refunded to him after the dispute was finally determined in their favour by the order of this tribunal. However, the interest as per these orders would necessary be governed by the provisions of section 11BB and should be paid after expiry of three months from the date of receipt of the application for refund and not from the date of deposit as has been held by the original authority in the orders dated 09.07.2019 and 18.07.2019. Even if it is held that appellant was entitled to refund of interest as per section 35 FF then also the interest could not have been paid from the date of deposit, in view of the Proviso to section 35FF, which provided that in respect of the amounts deposited prior commencement of Finance (No. 2) Act, 2014 the provisions as contained in erstwhile section 35FF shall apply. In the present case the refund applications for refund of amount deposited under protest were made on 21.05.2019 (received on 29.05.2019) and 21.06.2019 (received on 21.07.2019) and the refunds were paid vide order dated 11.06.2019 and 15.07.2019 i.e. within a month of the receipt of the application. Thus, appellant would not be entitled to any interest as per the section 11BB or Section 35 FF of Central Excise Act, 1944. Appeals are dismissed.

Summary

Issues Involved:

1. Entitlement to interest on the refund of service tax deposited under protest.
2. Application of Sections 11B, 11BB, 35F, and 35FF of the Central Excise Act, 1944.
3. Applicability of the doctrine of unjust enrichment.
4. Calculation and applicability of interest on delayed refunds.

Issue-wise Detailed Analysis:

1. Entitlement to Interest on Refund:

The primary issue in this case was whether the appellant was entitled to interest on the refund of service tax deposited under protest. The appellant argued that the amount paid was not a pre-deposit or service tax but merely a deposit made under protest, which was retained by the Revenue Authority without legal authority, violating Article 265 of the Constitution of India. The appellant claimed interest at 12% per annum from the date of deposit until realization. However, the tribunal held that the interest on the refunded amount should be governed by Section 11BB and not from the date of deposit, as the amount was refunded within a month of the refund application.

2. Application of Sections 11B, 11BB, 35F, and 35FF:

The tribunal analyzed the applicability of Sections 11B, 11BB, 35F, and 35FF of the Central Excise Act, 1944, which are applicable to service tax matters via Section 83 of the Finance Act, 1994. It was observed that the refund of pre-deposit is not subject to the process of refund of duty under Section 11B. Instead, Section 35FF governs the interest on delayed refund of pre-deposit. The tribunal noted that interest would commence after three months from the date of the refund application, as per Section 11BB, and not from the date of deposit.

3. Applicability of the Doctrine of Unjust Enrichment:

The tribunal addressed the issue of unjust enrichment, stating that since the amount was deposited under protest and not as a tax, the provisions of unjust enrichment under Section 11B were not applicable. The refund was made within the statutory period, and hence, the appellant was not unjustly enriched.

4. Calculation and Applicability of Interest on Delayed Refunds:

The tribunal referred to various judgments, including those of the Supreme Court, to determine the starting point for interest calculation. It was concluded that the interest liability under Section 11BB commences from the expiry of three months from the date of receipt of the refund application. The tribunal found that the appellant's refund applications were processed within a month, and therefore, no interest was payable under Sections 11BB or 35FF.

Conclusion:

The appeals were dismissed as the tribunal found that the appellant was not entitled to interest on the refunded amount, as the refunds were processed within the stipulated time frame. The tribunal emphasized the statutory provisions governing interest on refunds and the requirement of a formal refund application as per Section 11B. The decision reinforced the distinction between deposits made under protest and pre-deposits for appeals, highlighting that statutory provisions must be adhered to for interest claims.