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2024 (11) TMI 792 - AT - Service TaxDenial of eligible interest on the amount refunded - order of Commissioner (Appeals) has been challenged on the ground that the appellants were entitled to be paid interest at the rate of 12% per annum on the total amount of the refund from the date of its deposit till the date of its actual payment - HELD THAT - As per the Article 300A of Constitution of India also, no person shall be deprived of his property, save by authority of law. They cannot be deprived of the same and is entitled for benefits arising out of said property. Hence interest accrued on the amount in question during the period it remained deposited with the department is the property of the owner of the amount i.e. the appellant herein. We draw our support from the decision of RHL Profiles Ltd 2017 (4) TMI 1252 - ALLAHABAD HIGH COURT has held that once the confiscation has been set aside, confiscation of seized currency has been set aside and the fact is that the Department has earned interest during the period the currency was retained by it, it was held that payment of interest could not be denied merely for the reason that there is no express statutory provision. Bombay High Court also in the case of Union of India Vs. M P Desal 2019 (3) TMI 550 - BOMBAY HIGH COURT has held that amount seized in cash by the authorities is to be refunded along with the interest. Though in this case the rate of interest was held to be simple at the rate of 8%. There already has been decisions of Sony Pictures Networks India Pvt. Ltd. 2017 (5) TMI 864 - KERALA HIGH COURT wherein the decision of Hon'ble Apex Court in the case of Kuil Fireworks Inds 1997 (9) TMI 105 - SUPREME COURT is relied and it was held that rate of interest while refunding the amounts has to be 12% of the amount refunded. We hold that the appellants are entitled to claim the interest on the amount as has been refunded in their favour that too to be paid from the date of payment of initial amount till the date of its refund. As the amount in question was not deposited under Section 35F, however is akin to predeposit for the reasons as discussed above. It is clear that Section 11B and 11BB of Central Excise Act will not be applicable to the amount in question, the denial of the interest on the appellant s amount is held to be unjustified. Resultantly, we hold that the said proviso is not applicable to the given set of circumstances. We therefore hold that the findings are liable to be set aside. Section 35FF itself prescribes the rate of interest in the range of 5% to 36% when these provisions is read in the light of the above provisions and the decisions with respect to the rate of interest. However, we observe that the Central Government vide Notification No. 12/2023- Central Tax (Rate) dated 19.10.2023 has fixed the rate of interest @ 6%. Resultantly, we hold appellant to be entitled for getting interest on the amount of refund from the date of payment till the date of its disbursement, however at the rate of 6%. Hence, we hereby set aside the order under challenge. Appeal allowed.
Issues Involved:
1. Eligibility for interest on the refunded amount. 2. Applicability of relevant legal provisions for interest on refunds. 3. Interpretation of CBEC circulars and judicial precedents regarding interest on refunds. Issue-wise Detailed Analysis: 1. Eligibility for Interest on the Refunded Amount: The core issue addressed in this judgment is whether the appellant is entitled to interest on the refunded amount, which was initially paid under protest following a demand for service tax. The appellant argued that they were entitled to interest at the rate of 12% per annum on the refunded amount from the date of deposit until the date of payment. The appellant relied on various judicial precedents and CBEC circulars to support their claim for interest. The Tribunal examined the relevant provisions of the Central Excise Act, particularly Section 35FF, which deals with interest on delayed refunds of amounts deposited under Section 35F. According to this section, interest is payable on the refunded amount from the date of deposit until the date of refund, at a rate specified by the Central Government. The Tribunal concluded that the appellant was indeed entitled to interest on the refunded amount, but at the rate of 6% as fixed by the Central Government in Notification No. 12/2023-Central Tax (Rate) dated 19.10.2023. 2. Applicability of Relevant Legal Provisions for Interest on Refunds: The Tribunal scrutinized several sections of the Central Excise Act, including Sections 11AA, 11BB, 11DD, and 35FF, to determine their applicability to the case at hand. It was observed that Section 11BB, which deals with interest on delayed refunds, was not applicable in this scenario because the refund in question was not related to duty but was a revenue deposit. Instead, the Tribunal focused on Section 35FF, which specifically addresses the refund of amounts deposited as pre-deposits. The Tribunal also referred to judicial precedents, such as the decision in Sandvik Asia Ltd., which emphasized the entitlement to interest on delayed refunds. The Tribunal highlighted that the amount in question was akin to a pre-deposit and not a duty, thereby falling under the purview of Section 35FF rather than Section 11B or 11BB. 3. Interpretation of CBEC Circulars and Judicial Precedents Regarding Interest on Refunds: The Tribunal considered CBEC circulars, particularly the one dated 10.03.2017, which instructed adjudicating authorities not to withhold refunds on the grounds of pending appeals unless a stay had been granted. The circular emphasized that refunds should be processed promptly, and interest should be paid from the date of payment to the date of refund. The Tribunal also referred to judicial decisions, such as those in the cases of Parle Agro Pvt. Ltd. and Commissioner of Customs (Import), Raigad vs M/s. Finacord Chemicals (P) Ltd., which supported the appellant's claim for interest on refunds. These decisions underscored that the provisions of Section 11B were not applicable to revenue deposits and that interest should be granted on refunds of such deposits. In conclusion, the Tribunal set aside the order denying interest on the refunded amount and allowed the appeal, granting interest at the rate of 6% from the date of payment until the date of refund. The decision reinforced the principle that taxpayers are entitled to interest on amounts unjustifiably withheld by the revenue authorities, aligning with the broader legal framework and judicial precedents.
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