2018 (6) TMI 202 - AT - Service Tax

Refund of interest on the refundable interest - delayed payment of service tax - Section 11B of CEA - Held that - Though the amount refundable under section 11B is duty or interest paid on such duty, whereas under section 11B the interest is payable only on the duty which is refundable. Therefore, there is no explicit provision on refund of interest on the interest paid on the service tax - the lower authority has rightly denied the claim of interest for delayed sanction of refund of interest paid on service tax - appeal dismissed - decided against appellant.

Summary

Issues:
1. Entitlement for refund of interest on refundable interest paid for delayed service tax payment.

Analysis:
The case involved the question of whether the appellant was entitled to a refund of interest on the refundable interest paid due to delayed service tax payment. The appellant provided output services to their own unit, leading to a dispute regarding the taxability of the services provided. The appellant paid the service tax along with interest for the delay in payment. Subsequently, the demand for service tax and interest was set aside, resulting in a refund claim by the appellant for the service tax and interest paid. While the department sanctioned the refund of service tax and interest, they did not provide the interest on the refund of interest, leading to the present appeal.

In the appellant's argument, it was contended that the entire amount paid to the department was a deposit and not actual service tax or interest. Therefore, the refund should have been processed within three months from the date of application, and any delay in refund should accrue interest. The appellant relied on specific judgments to support their claim. On the other hand, the Revenue representative reiterated the findings of the impugned order, emphasizing that there was no provision for interest on interest as per Section 11B. The Revenue also cited relevant judgments to support their stance.

Upon careful consideration of the submissions from both sides and a thorough review of the records, the judge found that the amount refundable under Section 11B included duty of excise and interest paid on such duty. The sanctioning authority had already granted the refund of service tax along with the interest paid on it. However, upon examining Section 11B, it was evident that interest was payable only on the duty refundable, not on the interest paid on the service tax. Therefore, there was no explicit provision for refund of interest on the interest paid. The judge referenced a previous judgment to support this interpretation, stating that there was no provision for paying interest on interest under the Central Excise Act, 1944. Consequently, the lower authority's decision to deny the claim for interest on the delayed sanction of refund was upheld, and the appeal was dismissed.

In conclusion, the judgment clarified that while interest is payable on the duty refundable under Section 11B, there is no provision for payment of interest on the interest paid on service tax. The decision was based on a strict interpretation of the legal provisions and previous judicial precedents, ultimately leading to the dismissal of the appeal.