Interest On Delayed Service Tax Refund Payable On Expiry Of 3 Months From Application: CESTAT
The Chandigarh Bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) has held that interest on delayed service tax refunds is payable on the expiration of 3 months from the date of application.The bench of S. S. Garg (Judicial Member) has observed that under Section 11BB of the Act, interest is payable after the expiration of 3 months from the date of receipt of...
The Chandigarh Bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) has held that interest on delayed service tax refunds is payable on the expiration of 3 months from the date of application.
The bench of S. S. Garg (Judicial Member) has observed that under Section 11BB of the Act, interest is payable after the expiration of 3 months from the date of receipt of the application. Therefore, the appellant is entitled to interest on delayed payment from January 27, 2011, to the date of credit to the appellant's account at the rate of 6% as per the statute.
The appellant/assessee is in the business of manufacturing menthol, menthol crystals, and DMO and was availing of an area-based exemption under Notification No. 56/2002 dated November 14, 2002. The appellant filed a refund claim of Rs. 5,72,340 on account of a balance lying in their personal ledger account (PLA), which was pending and unutilized due to a withdrawal of duty.
The respondent did not sanction a refund claim in spite of repeated reminders made by the appellants. In the meantime, a case was made against the appellant on the allegation that the appellant was not engaged in the physical manufacturing of the goods. Therefore, a show cause notice was issued proposing the recovery of a refund of self-credit amounting to Rs. 23,49,397/-, which was culminated.
The appellant filed an appeal before the Tribunal, which was allowed by the Tribunal. The appellant, during the pendency of the appeal before the Tribunal, deposited Rs. 1,76,250 as a pre-deposit, i.e., 7.5% of the confirmed demand.
The appellant filed a refund claim and also requested the respondent sanction the refund claim, which the respondent sanctioned for the refund claim of Rs. 5,72,340 and the refund of pre-deposit Rs. 1,76,250. The interest on the delayed refund of the pre-deposit was also granted, but interest on the delayed payment of the refund claim was not sanctioned.
The appellant filed an appeal before the Commissioner (Appeals), Jammu, who rejected the appeal of the appellant.
The appellant contended that the order rejecting the interest on delayed payment of refund is not sustainable in law and is against the settled position of law. As per Section 11BB of the Central Excise Act, 1944, it is evident that the interest is payable after the expiration of 3 months from the date of receipt of the application. The Commissioner (Appeals) has wrongly rejected the contention of the appellant on the ground that the competent authority was not in a position to decide refund claims for the period when the issue of self-credit was pending for investigation.
The CESTAT held that the appellant is entitled to interest on the delayed refund.
The tribunal directed the authority to compute the amount of interest and pay it within a period of 2 months.
Case Title: M/s Champion Flavours, Meerut Versus Commissioner CGST, Jammu
Case No.: Excise Appeal No. 60394 Of 2022
Date: 29.05.2023
Counsel For Appellant: Naveen Bindal
Counsel For Respondent: Amandeep Kumar