2016 (4) TMI 291 - HC - Service Tax

Court orders payment of interest and costs in delayed refund case.

PURNIMA ADVERTISING AGENCY PVT. LTD. AND 1 Versus UNION OF INDIA THROUGH SECRETARY AND 2

The court allowed the petition, directing the respondents to pay the petitioner interest of Rs. 3,07,423/- on the delayed refund from 03.06.2008 to ... Entitlement for payment of interest for the period from 03.06.2008 to 10.03.2010 - Refund claim was made on 24.01.2005 and the amount was refunded on 12.11.2010, hence delayed refund - Section 11BB of the Central Excise Act, 1944 - Respondent submitted that with effect from 03.06.2008, the amount had been transferred to the Consumer Welfare Fund and therefore, the liability of the revenue to pay any interest was discharged. Held that:- such contention of revenue cannot be countenanced for the reason that the section 11BB of the Central Excise Act provides for payment of interest after a period of three months from the date of application till the date of actual payment. The statute does not provide for curtailment of the period for which the interest has to be paid on account of any superwinning circumstances, like transfer of the amount to the Consumer Welfare Fund. The learned counsel for the respondents is not in a position to point out any provision of law which shows that when the amount is transferred to the Consumer Welfare Fund, the period for which the assessee would be entitled to interest under section 11BB of the Central Excise Act would stand curtailed. It is a settled legal position that insofar as the taxing provision is concerned, the same has to be construed strictly and one has to look merely at what is said in the relevant provisions; there is nothing to be read in; nothing to be implied and there is no room for any intendment. On a plain reading of section 11BB of the Central Excise Act, it is evident that the object behind such provision is to provide for payment of interest to a party commencing from a period after three months from the date of application till the date of actual refund. The reason is not far to see, namely, that a party should not be prejudiced on account of any delay in deciding the application or on the ground that the party might have to challenge the order of refund before any other forum. As regards the transfer of the amount to the Consumer Welfare Fund, the order passed by the Commissioner (Appeals) holding that there was unjust enrichment, was held to be erroneous and has been set aside, under such circumstances, no prejudice ought to be caused to the petitioner on account of any erroneous order passed by the respondents authority, without there being any default on part of the petitioner. Therefore, the petitioner is entitled to interest from 24.04.2005 till the actual payment i.e. upto 10.03.2010 and the Tribunal was, not justified in holding that from the date of transferring the sum to the Consumer Welfare Fund, the petitioner was not entitled to payment of interest on the refund amount. Entitlement of compensatory costs for late payment of interest - Petitioner submitted that petitioner should be compensated for the prejudice caused to it due to inordinate delay in payment after the lapse of statutory period - Held that:- the petitioner was required to unnecessarily litigate in two rounds; in the first round, up-till the Tribunal and in the second round, upto this court, for the purpose of availing of the statutory interest payable to it. Under such circumstances, the petitioner is entitled to the grant of compensatory costs, which are quantified at ₹ 25,000/-. - Decided in favour of petitioner Issues Involved:1. Entitlement to interest on delayed refund for the period from 03.06.2008 to 10.03.2010.2. Entitlement to interest on interest.3. Entitlement to compensatory costs for the delay in payment of interest.Detailed Analysis:1. Entitlement to Interest on Delayed Refund:The petitioner sought interest on a delayed refund of Rs. 28,94,776/- for the period from 03.06.2008 to 10.03.2010 under Section 11BB of the Central Excise Act, 1944. The Tribunal had dismissed the petitioner’s appeal, holding that interest was payable only up to 02.06.2008, as the amount was transferred to the Consumer Welfare Fund due to unjust enrichment. However, the court found that Section 11BB mandates interest from three months after the refund application date until the actual refund payment, regardless of any transfer to the Consumer Welfare Fund. The court emphasized that the statutory provisions must be strictly construed and ruled that the petitioner was entitled to interest from 24.04.2005 to 10.03.2010.2. Entitlement to Interest on Interest:The petitioner also claimed interest on the interest amount of Rs. 5,40,094/- for the period from 10.03.2010 to 10.11.2010. The court referred to the Supreme Court decision in Commissioner of Income Tax, Gujarat v. Gujarat Fluoro Chemicals, which clarified that only statutory interest could be claimed, not interest on interest. Consequently, the court did not grant this relief.3. Entitlement to Compensatory Costs:Given the unnecessary litigation the petitioner had to endure, the court considered the claim for compensatory costs. The court noted that the petitioner had to litigate initially for the refund and subsequently for the interest on the delayed refund. In light of these circumstances, the court awarded compensatory costs of Rs. 25,000/- to the petitioner.Conclusion:The petition was allowed. The respondents were directed to pay the petitioner interest of Rs. 3,07,423/- on the delayed refund for the period from 03.06.2008 to 10.03.2010 and compensatory costs of Rs. 25,000/-. The court made it clear that the petitioner was not entitled to interest on interest but was entitled to compensation for the delay in receiving the statutory interest.