Section 11B of the Central Excise Act, 1944 (applicable to Service Tax vide Section 83 of the Finance Act) provides for claim of refund of duty. The person claiming the refund under this Section can file an application before the Authorities within one year of the relevant date. The relevant date will differ in every case depending on the circumstances and facts involved. Further, it is stated in this Section that the limitation of one year would not apply to any amount paid 'Under Protest.' Thus, the refund claim of any amount paid under protest can be filed even after the expiry of one year, but the filing has to be within a reasonable period. Section 11BB deals with a situation where the refund claimed under Section 11B was not refunded within three months from the date of receipt of application, the revenue becomes liable to pay interest to the person claiming the refund. There has been huge litigation with respect to the issue i.e., whether the amount for which the refund has been claim is a 'duty' or just a 'deposit'. The reason for such a controversy on this issue was that if the amount claimed as refund would be considered a 'duty', then the interest rate for payment of interest by the revenue would be lower as compared to the interest rate when the amount claimed as refund is considered as 'deposit'. Various conflicts with respect to whether the amount claimed as refund has to be considered as 'duty' or 'deposit' reached CESTAT and higher authorities. The Hon'ble Benches through their decisions clarified the situations like, any amount deposited under protest would be considered as 'deposit'; any amount paid during investigation is to be considered as 'deposit'; any amount paid as pre-deposit for any appeal will be considered as 'deposit', if appeal is allowed and refund claim is filed and similarly, some other issues were decided based on the facts and circumstances of the case. There is no doubt that if the amount claimed as refund is considered as 'deposit', the revenue would be liable to pay interest at the higher rate as compare to where the amount claimed as refund is considered 'duty.' Also, in case of 'deposit' the interest would be payable from the date of payment of the amount claimed as refund and in case of 'duty', the interest would be payable after the expiry of the three months from the receipt of refund application.
A case was argued by our team before the Hon'ble CESTAT Chandigarh, wherein peculiar facts were involved in the matter and the assessee filed the refund claim for the subsequent period as the issue was decided in its favour for the prior period, however, show cause notices were issued for the period subsequent to the period for which the refund claim was filed. The facts of the case are the appellant is engaged in providing Visa Consultancy Services to its various clients who wishes to study or settle down in the foreign country. During the relevant period, a dispute was going on between the appellant and the department with respect to taxability of referral services rendered by the appellant. The view of the department was that a service provided by the appellant to Canadian banks and foreign universities/colleges does not amount to export of services and therefore, four show cause notices were issued to the appellant. The appellant in order to safeguard themselves from the charge of interest and penalty as well as to buy mental peace, deposited the amount under protest as the dispute was going between the department and the appellant. With respect to referral fee (for the prior period), the issue was decided in the favour of the Appellant and it was held that referral fee charged would amount to export and hence not liable to Service Tax. Subsequent to which, the appellant filed the refund claim for the period in dispute i.e., 2014 – 2015, which was rejected by the authorities. The appellant challenged the rejection order before the Hon'ble CESTAT Chandigarh. The Hon'ble Bench decided the issue in favour of the assessee/appellant and it was held the refund is within the period of limitation. In pursuance of the CESTAT order, the refund amount was sanction to the appellant, however, no interest was remitted. Challenging the non-payment of interest, an appeal was filed before the Hon'ble CESTAT. On the behalf of the appellant, it was argued by our team that the amount paid by the appellant was under protest and to avoid the implication of huge liability of interest and penalty, when the investigation and dispute was going on for the prior period and the subsequent period. Tribunal itself while passing the order dated 14.06.2021 has recorded that there was dispute going on between the appellant and department. Further, the date of providing the bank details cannot be considered as date of filing of refund claim when the bank details were already available with the department. The amount deposited remained an amount or deposit, as the same was neither appropriated nor any demand was raised against it and therefore, Section 11B and 11BB would not be applicable in the present case and the interest has to be granted from the date of deposit. Various decisions were relied upon on the issue involved, wherein the interest was granted from the date of deposit. On behalf of Revenue, it was argued that the amount deposited by the appellant was not under protest and during investigation as no show cause notice was issued to the appellant, hence, no investigation was conducted. It was argued that the appellant self-assessed his service tax liability for the year 2014-2015 and made the payment through service tax Challans under proper accounting heads and filed ST-3 returns. Tribunal order does not talk about payment under protest. Relying on few decisions, it was submitted even if the amount is paid under protest, Section 11B would apply. Therefore, the appellant should be granted interest at the rate of 6% not 12%.
The Hon'ble Bench after considering the submissions from the both sides and facts of the case, found that the only issue involved in the present case relates to non-sanctioning of the interest on the refund sanctioned by the department and further the rate of interest on delayed refund. It was found by the Hon'ble Bench that issue has been considered by the Tribunal in various cases and it has been consistently held that the assessee is entitled to claim interest from the date of deposit till the date of payment at the rate of 12%. Relying on the decisions in the matter of Riba Textiles; Ghaziabad Ship Breakers Pvt.Ltd.-2010 (260) ELT 274 (Tri.Ahmd.); Parley Agro Ltd. Reported at 2022 (380) E.L.T. 219; Kesar Enterprises Vs. Commissioner of CGST, Noida (Tri.-Allahbad)-2022 (380) ELT 319, Delhi; Allied Chemical and Pharmaceuticals Pvt. Ltd. Vs. CCE & CGST, Jaipur (Tri.-Delhi)-2022 (382) ELT, Delhi; Continental Engines Pvt. Ltd. Vs. Commr. (Appeal), C.Ex & CGST, Jaipur-I, (Tri.-Delhi) -2022 (382) ELT 522 (Delhi); CCE Vs. Pricol Limited - 2015 (320) ELT 703 (Mad). CCE Vs. Eveready Industries India Limited -2017 (357) ELT 11(All.) and Gujarat Engineering Works Vs. CCE -2013 (292) ELT 547 (Tri.-Ahmd.), 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 Hon'ble Bench with the above findings and observations, allowed the appeal filed by the assessee/appellant.
Case details — Sunrise Immigration Consultants Pvt. Ltd. v. CG & S.T., Chandigarh
Forum — CESTAT
Case No. — dated 11.04.2023 in ST/60347
Represented by — Adv. Varun Gaba