Service Tax - Refunds - Interest payable on delayed refunds: CESTAT

AHMEDABAD : AGGRIEVED by the rejection of interest on delayed refunds, appellants preferred appeal before the First Appellate Authority. The First Appellate Authority did not agree with the contentions raised by the appellant and rejected the appellants' claims for interest on the belated

refunds.

The assessee is before the CESTAT:

Appellants pleaded that: Dept is liable to pay interest on the belated sanction of refunds;the First Appellate Authority has over looked the fact that CBEC Circular No. 114/8/2009-ST dtd 20th May, 2009 specifically qualifies that no service tax is payable on the services rendered to a SEZ unit; if any service tax is paid that has to be refunded within 30 days or in any case not beyond 45 days from the date of filing of refund claim.

Revenue argues that: the provisions of Notification No. 9/2009-ST as amended by Notification No. 15/2009-ST do not provide any payment of interest to the appellant; both the lower authorities were correct in coming to the conclusion that the refund claims filed under notification 15/2009 do not fall under the category of refund claims under Section 11B of the Central Excise Act 1944 and provisions of Section 11BB of Central Excise Act 1944 are not attracted.

Issue before the Tribunal : The only issue for consideration is whether the appellant is eligible for interest on the refunds sanctioned belatedly. The Tribunal found the lower authorities' orders incorrect for more than one reason:

- Firstly, it is to be noted that any services rendered in an SEZ units are exempted by SEZ Act 2005 and the service tax in excess of what was in other ways leviable is to be refunded as per the provisions. In the case in hand, undisputedly services were rendered to the appellant in an SEZ unit and service tax paid by the service provider. This basic fact has been overlooked by the lower authorities. Notifications No. 9/2009-ST and 15/2009-ST are only putting into operations the exemptions/immunity available to an SEZ unit. This is the ratio which has been decided in the case of Reliance Ports and Terminals Ltd -2013-TIOL-1473-CESTAT-AHM.

- Secondly, the First Appellate Authority has held that the appellants claim is contrary to the spirit of the Board circulars is findings contrary to the spirit of both the circulars dtd 20th May, 2009 wherein the Board has categorically directed the formulation that the refund claim of the service tax paid on services rendered to SEZ units should be sanctioned within the maximum time of 30 days from the date of filing of refund claim and in any case beyond 45 days from the date of filing of the refund claim. Clear instructions of the Board are not followed in the case in hand which is very evident from the delay which has occurred in sanctioning refund claim. The time limit which has been given out in place by the Board needs to have been followed failing which, the liability to pay interest arises. The circular dtd 20th May, 2009 has practically put the refund claims filed in terms of Notification of 9/2009 on a higher platform as compared to other types of refund claims filed under Section 11B for which 3 months period was prescribed for processing the claim from the date of filing of the refund claims. Expeditious sanction of refund claims was considered in true spirit of both the circular May 2009 which has been completely ignored by the lower authorities. It was not necessary to provide interest in the belated sanction of refund claim as interest is statutorily payable in terms of the provisions of Section 11BB of Central Excise Act 1944.
- Thirdly, the judgment of the Hon'ble High Court of Gujarat in the case of Reliance Industries Ltd has clearly rejected the arguments of the Revenue that Cenvat Credit Rules did not specifically provide for interest on sanction of the refund claims.

Held: The impugned orders rejecting the claim of interest of the appellant are incorrect and not in consonance with the law as settled by various judicial fora. Accordingly, the impugned orders are set aside and the appeals allowed with consequential relief if any.