2016 (11) TMI 23 - AT - Service Tax

Interest on delayed refund - banking and other financial services - discount/commissions received by the appellant from the merchant establishments in connection with credit card transactions liable to payment of service tax and tax paid upon the same - refund claimed afterwards, refund was allowed - whether the appellant is entitled to get interest on delayed refund? - Section 11BB - Held that - the issue stands decided in the case of Ranbaxy Laboratories Ltd. vs. UOI & Ors. 2011 (10) TMI 16 - Supreme Court of India where it was held that liability of the revenue to pay interest under Section 11BB of the Act commences from the date of expiry of three months from the date of receipt of application for refund under Section 11B(1) of the Act and not on the expiry of the said period from the date on which order of refund is made. The appellant eligible for interest from the date of expiry of the period of three months from the date of filing of the refund claim till the date of payment of refund - appeal allowed - decided in favor of appellant.

Summary

Issues:
- Entitlement to interest on delayed refund under Section 11BB of the Central Excise Act, 1944.

Analysis:
The appeal before the Appellate Tribunal CESTAT Bangalore concerned the entitlement of a bank providing financial services to interest on a refund claimed for service tax paid on discount/commissions received from merchant establishments in credit card transactions. The appellant claimed a refund of the service tax paid and contended that they were entitled to interest for the delayed payment of the refund. The issue revolved around the interpretation of Section 11BB of the Central Excise Act, 1944, regarding the payment of interest on delayed refunds.

The appellant's representative argued that the issue of interest on delayed refunds had been settled by the Supreme Court in the case of Ranbaxy Laboratories Ltd. vs. UOI & Ors., where it was held that interest would be payable under Section 11BB if the duty is not refunded within three months from the date of the application. The appellant claimed interest for the period between the filing of the refund claim and the actual payment of the refund.

The Departmental Representative agreed that the issue was covered by the Supreme Court judgment, acknowledging the applicability of the legal principle established in the Ranbaxy case. The Tribunal examined the provisions of Section 11BB, emphasizing that interest becomes payable if the duty claimed is not refunded within three months from the date of the refund application. The Tribunal clarified that the Explanation in Section 11BB did not affect the date from which interest becomes payable, affirming that interest accrues after the expiry of three months from the date of the refund claim.

In line with the Supreme Court decision and the interpretation of Section 11BB, the Tribunal held that the appellant was entitled to interest from the date of the expiry of the three-month period from the filing of the refund claim until the actual payment of the refund. Consequently, the Tribunal set aside the previous order and allowed the appeal, granting the appellant consequential relief in the form of interest on the delayed refund payment.

In conclusion, the judgment established the appellant's entitlement to interest on delayed refunds under Section 11BB of the Central Excise Act, 1944, based on the legal precedent set by the Supreme Court and a clear interpretation of the relevant statutory provisions.