CESTAT allows 12% Interest on Delayed Refund of Service Tax Paid by Mistake [Read Order]

The Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Delhi Bench ruled that a 12% interest rate should be applied to a delayed refund of service tax that was mistakenly paid and allowed the same.

The appellant/assessee, Gajendra Singh Sankhla, had requested a refund of service tax that had been inadvertently paid on the building of independent or individual homes. Both lower authorities rejected the refunds, but the Tribunal granted them on the grounds of unfair enrichment, limitation, and merit after concluding that the construction was exempt from 01.07.2012 under Notification No. 25/2012-ST dated 20.06.2012 and was not taxable before that date.

The appellants filed a reimbursement claim with 12% interest in light of the Tribunal's Final Order. Using Section 11BB of the Central Excise Act of 1944, both authorities approved the refunds along with 6% interest.

The order authorizing 6% interest has been contested by the appellant. Although the appellant mistakenly deposited the money on non-taxable and exempted services, it cannot be argued that this sum qualifies as service tax and is subject to Section 11B of the service tax.

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According to the judicial member Ashok Jindal, the appellant/assessee paid service tax in error, which is completely non-refundable and would be considered a revenue deposit rather than service tax paid by the appellant. Consequently, the Central Excise Act's Section 11B clause is not relevant.

The Tribunal held that the appellant is entitled to 12% interest on postponed reimbursements. The department was ordered by the CESTAT to give the appellant 12% interest annually.

To Read the full text of the Order CLICK HERE

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