Interest on Delayed Refund must be Payable from Date of Deposit till Date of Payment: CESTAT allows 12% Interest [Read Order]

In a recent case, the Chandigarh Bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT)has held that the interest on delayed refund must be payable from the date of deposit till the date of payment and allowed the 12% interest on refund.

Impressive Management Solutions Pvt, the appellants are engaged in providing services namely recovery agents services and are registered with the Service Tax Department, the appellants were under a bonafide belief that the recovery agents services were not liable to discharge service tax as the same was liable to tax on reverse charge basis.

The department undertook an enquiry based on Form 26AS of the appellant and concluded that the appellant had short-paid a certain amount to service tax. The appellant categorically informed the department that they were under the impression that since the entire amount recovered by them was inclusive of service tax and the service tax liability was being discharged by the telecom companies on the entire amount. Hence, they were not discharging the service tax liability.

A show cause notice was issued proposing to demand service tax amounting and further proposed penalty on them. After the due process, the Order-in-Original confirmed the demand and a penalty under section 78 and section 77 was also imposed. 

The appellant filed an appeal before the Tribunal against the order confirming the demand for service tax and imposition of penalty. The Tribunal vide final allowed the appeal of the appellant by holding that the extended period of limitation was not invocable and has also set aside the penalty under section 78.

The appellant requested the department to refund an amount of Rs. 22,81,472/- which was beyond the limitation period. The refund was filed on 18.12.2019 and the same was sanctioned to the appellant vide Order-in-Original dated 15.01.2020. The refund was sanctioned but no interest was given on the refund.

Subsequently, the department suo moto amended the order vide order dated 17.02.2020 and held that no refund was payable to the appellant. The appellant filed an appeal against the amendment order before the Commissioner (Appeal) which was rejected. Thereafter, the appellant filed an appeal against the said order of the commissioner appeal before the Tribunal, which allowed the appeal.

It was held that the rectification order passed by the adjudicating authority was wrong and held that the earlier order sanctioning the refund was proper to order and restored the same. The appellant filed an appeal against the order for non-sanctioning of interest but the same was rejected.

It was submitted that the issue as to from which date the interest is payable in the case of the amount deposited during the investigation has already been settled by a catena of decisions consistently holding that the assessee is entitled to claim interest on delayed refund from the date of deposit till its realization with 12% interest.

In the case of Reba Textiles Ltd., it was held that the assessee is entitled to claim interest from the date of payment of the initial amount till the date of its refund and further the Tribunal relied upon the decision of Kerala High Court as well as the decision of the Ahmadabad Tribunal and thereafter granted the interest of 12% per annum. 

A single member comprising Mr S. S. Garg, member (judicial) held that “the appellant is entitled to claim interest on delayed refund from the date of deposit till the date of payment at the rate of 12% per annum.” The Court set aside the impugned order and allowed the appeal.  

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