2024 (4) TMI 230 - AT - Service Tax

Direction to recalculate the refund amount of interest granted in excess - relevant date for calculation of interest - Supply of tangible goods for use services - reverse charge mechanism - Whether the appellant is entitled for interest from the date of deposit of the amounts paid under protest on 14.10.2009 4.11.2009 or from 3 months of filing the claim? - HELD THAT - The Apex Court in the case of COMMISSIONER OF CENTRAL EXCISE HYDERABAD VERSUS ITC. LTD. 2004 (12) TMI 90 - SUPREME COURT has held that in the event of refund of any pre-deposit when a question arises of giving interest on the delayed refund of pre-deposit as provided under the Circular by CBEC the payment of interest on such delayed refunds beyond three months would require the payment of interest and the same is to be 12% per annum. This period of three months commences from the date of final disposal of the dispute between the parties. The Circular 802/35/2004 dated 08.12.2009 if is closely examined relates to return of deposit made as per the direction of the Tribunal wherein it is specified that the deposit needs to be returned within three months of the disposal of the appeal - While further interpreting Section 11BB the Apex Court held further that interest under the said Section 11B of the Act becomes payable on the expiry of a period of three months from the date of receipt of application under sub-section (1) of Section 11B of the Act and that the said explanation would not have any bearing or connection with the date from which the interest under Section 11BB becomes payable. Thus a collective reading of these decisions and close examination of the same the question here is not of interest on refund of the duty amount but of the predeposit. There is no express provision of payment of interest under Section 35FF of Central Excise Act 1944 on the refund of pre-deposit. However drawing analogy from Section 11B of the Central Excise Act which provides for the refund of the duty Section 11BB as held by the Apex Court herein above speaks of the interest on the refund of the duty as there would arise a requirement of payment of interest if the duty is not refunded within a period of three months from the date of receipt of application to be submitted under subsection (1) of Section 11B of the Act. Such interest needs to be paid as such rate fixed by the Central Government on expiry of period of three months from the date of receipt of application. In the instant case the amount claimed as refund being the duty paid and continued to lie as pre-deposit with the department. Hence once the Tribunal decided in favour of the present appellant on 24.10.2013 the payment of interest would start running from the same date. The Tribunal while so ordering to set aside the order of the Commissioner ordered to refund the said amount along with interest. The refund of amount considered as pre-deposit would be at par with the refund of duty and the interest would be payable on such pre-deposit. Whether the appellant is entitled to interest during the period of 123 days when the Tribunal s order in PETRONET LNG LTD VERSUS COMMISSIONER OF SERVICE TAX 2013 (11) TMI 1011 - CESTAT NEW DELHI was stayed by the Supreme Court? - HELD THAT - The Apex Court in the case of M/S. STYLE (DRESS LAND) VERSUS UNION TERRITORY CHANDIGARH ANR. 1999 (8) TMI 969 - SUPREME COURT has held It is a settled principle of law that as and when a party applies and obtains a stay from the court of law it is always at the risk and responsibility of the party applying. Mere passing of an order of stay cannot be presumed to be the conferment of any additional right upon the litigating party - In view of the settled position of law the interest is payable for the 123 days as well. The impugned order is set aside - appeal allowed.

Summary

Issues Involved:
1. Entitlement to interest from the date of deposit of amounts paid under protest.
2. Entitlement to interest during the period of stay granted by the Supreme Court.

Summary:

Issue 1: Entitlement to Interest from Date of Deposit

The appellant contested the Order-in-Appeal dated 06.12.2016, which directed recalculation of the refund amount and interest. The appellant argued that the amounts paid under protest did not constitute duty/tax since the activity was held non-taxable. They cited Article 265 of the Constitution of India, asserting that no tax shall be levied or collected without the authority of law. Therefore, the Department was bound to pay interest on the total amount deposited under protest. The Tribunal referenced Section 11BB of the Central Excise Act, which mandates interest on delayed refunds if not paid within three months from the date of receipt of the application. The Tribunal noted that payments made under protest are considered deposits, not duty, as supported by various judicial precedents. The Tribunal concluded that interest on the pre-deposit amount is payable from the date the Tribunal decided in favor of the appellant on 24.10.2013.

Issue 2: Entitlement to Interest During Stay Period

The appellant sought interest for the 123 days when the Tribunal's order was stayed by the Supreme Court. The Tribunal referred to the Supreme Court's judgment in Style (Dress Land) v. UT, Chandigarh, which held that obtaining a stay does not confer any additional rights and that interest is payable for the duration of the stay. The Tribunal concluded that interest is payable for the 123 days during which the stay was in effect.

Conclusion:

The Tribunal set aside the impugned order and allowed the appellant's appeal, granting interest from the date of deposit and including the period of the stay.

(Pronounced in the open Court on 04/04/2024)