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2025 (5) TMI 644 - AT - Service TaxClaim of interest on delayed refund - rate of interest - relevant date of interest - HELD THAT - The amount paid by the appellant is in nature of deposit only for that the provisions of Section 11B of the Central Excise Act are not applicable. Consequently interest prescribed under Section 11BB is also not applicable. In view of this following the decision in the case of Parle Agro Pvt. Ltd. 2021 (5) TMI 870 - CESTAT ALLAHABAD it is held that appellant is entitled to claim interest at the rate of 12% - The same view was taken by the Tribunal in the case of Gajendra Singh Sankhla others 2025 (5) TMI 482 - CESTAT NEW DELHI . In that case also after relying the various judicial pronouncement this Tribunal came to the conclusion that as the provisions of Section 11B are not applicable consequently the appellant is entitled to claim interest at the rate of 12%. From which date the appellant is entitled to claim interest - HELD THAT - The said issue has been examined by this Tribunal in case of Riba Textile Ltd. vs. Commissioner of CE ST Panchkula 2020 (2) TMI 602 - CESTAT CHANDIGARH where it was held that Claim for refund in the present case was filed on 6th January 2016 which was returned and again filed on 19th April 2017. Section 142 of the Act deals with miscellaneous transitional provisions including the claim for refund filed by any person before on or after the appointed day for refund of any amount of Cenvat Credit duty tax interest or any other amount paid under the exciting law. - the appellant is entitled to claim interest from the date of deposit i.e 19.01.2011 till its realization. Conclusion - i) Amounts deposited under protest during the pendency of adjudication are deposits not payments of service tax or duty. The provisions of Section 11B (interest from refund claim date) and Section 11BB (interest at 6%) do not apply to such deposits. ii) Interest on delayed refunds of such deposits is payable at the rate of 12% per annum. iii) Interest entitlement arises from the date of deposit not from the date of filing the refund claim. Appeal disposed off.
1. ISSUES PRESENTED and CONSIDERED
The core legal questions considered by the Tribunal were: (a) From which date is the appellant entitled to claim interest on the delayed refund of the amount deposited under protest? (b) At what rate should the interest on the delayed refund be calculated-whether at the rate prescribed under Section 11BB of the Central Excise Act (6%) or at a higher rate of 12%? 2. ISSUE-WISE DETAILED ANALYSIS Issue (a): Date from which interest is payable on delayed refund Relevant legal framework and precedents: The determination of the date from which interest is payable on delayed refunds is governed by the provisions of the Central Excise Act, particularly Sections 11B and 11BB, and transitional provisions under Section 142. The Tribunal examined the applicability of these provisions in light of the nature of the amount deposited under protest. The Tribunal relied on its earlier decision in the case of Riba Textile Ltd. vs. Commissioner of CE & ST, Panchkula, where it was held that interest entitlement arises from the date of deposit of the amount. This position was further affirmed by the Punjab & Haryana High Court in 2022 (62) GSTL 136 (P & H). Court's interpretation and reasoning: The Tribunal noted that the amount deposited by the appellant was under protest and was held to be a deposit in nature rather than payment of service tax or duty. Therefore, the provisions of Section 11B, which prescribe interest from the date of filing the refund claim, do not apply. Instead, the interest should accrue from the date of deposit itself. Key evidence and findings: The appellant made the deposit on 19.01.2011 under protest. The Tribunal's earlier ruling dated 30.01.2023 clarified that such deposits are not payments of service tax but deposits pending adjudication. The refund claim was filed on 03.08.2016 but interest was allowed only from three months after the refund claim date, which was contested. Application of law to facts: Since the amount was a deposit and not a tax payment, the Tribunal applied the principle that interest should be calculated from the date of deposit (19.01.2011) until realization. This approach aligns with the principle that the appellant should be compensated for the time value of money from when the government held the appellant's funds. Treatment of competing arguments: The department argued that interest should be calculated only after three months from the date of filing the refund claim, relying on the Apex Court decision in Ranbaxy Laboratories Limited (2011) and the applicability of Section 11B. The Tribunal rejected this, holding that since the amount was not service tax, Section 11B does not apply, and the interest entitlement arises from the date of deposit. Conclusions: The appellant is entitled to claim interest from the date of deposit, i.e., 19.01.2011, until the refund is realized. Issue (b): Rate of interest payable on delayed refund Relevant legal framework and precedents: Section 11BB of the Central Excise Act prescribes interest at 6% for delayed refunds of service tax or excise duty. However, where the amount deposited is not service tax or duty but a deposit, this provision may not apply. The Tribunal referred to its decision in Parle Agro Pvt. Ltd. vs. Commissioner of Central Goods & Service Tax, Noida, and the case of Gajendra Singh Sankhla & others, where it was held that in such cases, interest at the rate of 12% is payable. Court's interpretation and reasoning: The Tribunal observed that since the amount was a deposit and not service tax or duty, the provisions of Section 11BB prescribing 6% interest are not applicable. Following the aforementioned precedents, the Tribunal held that the appellant is entitled to interest at the rate of 12% on the refund amount. Key evidence and findings: The appellant deposited Rs. 1,26,59,954/- under protest. The refund claim was eventually allowed, but interest was granted at 6% from three months after the refund claim date. The appellant contended for 12% interest from the date of deposit. Application of law to facts: The Tribunal applied the principle that deposits made under protest are not payments of tax and thus attract interest at the higher rate of 12%, as per the legal precedents cited. Treatment of competing arguments: The department argued that the amount was paid as service tax after confirmation of demand, and hence the refund and interest should be governed by Section 11B and 11BB, entitling the appellant only to 6% interest. The Tribunal rejected this contention, emphasizing the nature of the amount as a deposit during the pendency of adjudication, not tax payment. Conclusions: The appellant is entitled to interest at the rate of 12% on the amount deposited under protest. 3. SIGNIFICANT HOLDINGS The Tribunal made the following crucial legal determinations: "It is, therefore, clear from the aforesaid decisions of the High Courts and the Tribunal that any amount deposited during the pendency of adjudication or investigation is in the nature of a deposit and, therefore, cannot be considered to be towards payment of service tax or excise duty. The principles of unjust enrichments, therefore, would not apply if a refund is claimed for refund or this amount." "Therefore, the amount paid by the appellant is in nature of deposit only for that the provisions of Section 11B of the Central Excise Act are not applicable. Consequently, interest prescribed under Section 11BB is also not applicable. In view of this following the decision in the case of Parle Agro Pvt. Ltd., I hold that appellant is entitled to claim interest at the rate of 12%." "I hold that the appellant is entitled to claim interest from the date of deposit i.e, 19.01.2011 till its realization." Core principles established include: - Amounts deposited under protest during the pendency of adjudication are deposits, not payments of service tax or duty. - The provisions of Section 11B (interest from refund claim date) and Section 11BB (interest at 6%) do not apply to such deposits. - Interest on delayed refunds of such deposits is payable at the rate of 12% per annum. - Interest entitlement arises from the date of deposit, not from the date of filing the refund claim. Final determinations: The appellant is entitled to refund of the amount deposited under protest along with interest at the rate of 12% per annum calculated from the date of deposit (19.01.2011) until realization. The appeal was disposed of accordingly.
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