2021 (12) TMI 243 - AT - Service Tax

Revenue's Appeal Denied, Interest Granted on Deposit Pending Litigation

The appeal by the Revenue against the allowance of interest on a deposit pending litigation was dismissed. The Adjudicating Authority was directed to ... Interest on deposit during litigation - pre-deposit - entitlement to interest from date of deposit till refund - refund of deposited amount - erstwhile Section 35FF: interest on delayed refunds - applicability of precedents (Sandvik Asia Ltd. and Parle Agro) - rate of interest payable on refundInterest on deposit during litigation - pre-deposit - entitlement to interest from date of deposit till refund - applicability of precedents (Sandvik Asia Ltd. and Parle Agro) - Whether the amount deposited by the assessee during investigation/pending litigation constitutes a pre-deposit entitling the assessee to interest from the date of deposit till the date of refund, and at what rate such interest is payable. - HELD THAT: - The Tribunal accepted the assessee's position following the Division Bench decision in Parle Agro which, relying on the Apex Court in Sandvik Asia Ltd., held that amounts deposited during investigation and/or pending litigation operate as ipso facto pre-deposit. Consequently, where the assessee succeeds in appeal or the demand is dropped, the depositor is entitled to interest on the deposited amount from the date of deposit until the date of refund. The Revenue's contention that the deposit made in 2015 was not a pre-deposit and that the erstwhile Section 35FF (as amended w.e.f. 06.08.2014) governed interest obligations was rejected; the Tribunal applied the settled precedents to allow interest. The Tribunal further directed payment of interest at the rate held in Parle Agro, namely 12% per annum, to be disbursed within 45 days of receipt of the order copy. [Paras 7, 8, 9]Appeal dismissed; interest on the deposited amount is payable from date of deposit till date of refund and shall be paid at 12% per annum within 45 days.Final Conclusion: The Revenue's appeal is dismissed. The Adjudicating Authority is directed to pay interest on the amount deposited during litigation from the date of deposit until refund at 12% per annum, to be disbursed within 45 days from receipt of this order. Issues:Appeal against allowance of interest on deposit pending litigation.Analysis:1. The Revenue appealed against an order-in-appeal allowing interest at 6% on the deposit amount pending litigation until the actual refund date. The case involved a show cause notice alleging non-payment of service tax on registration fees and transfer charges. The appellant was issued recurring show cause notices for subsequent periods.2. The order-in-original dated 27.08.2019 adjudicated the show cause notices, and the respondent was successful, leading to a refund claim of Rs. 2,47,32,326. The Assistant Commissioner allowed the principal amount refund but rejected the interest claim, stating that interest was not payable as there was no delay in sanctioning the refund claim by the revenue. The Commissioner (Appeals) later granted interest at 6% from the deposit date till the refund date.3. The Revenue filed an appeal arguing that interest should be paid on the refund claim if not granted within three months from the receipt of the appellate order, citing the erstwhile Section 35FF. The appellant contended that the amount deposited in 2015 was not a pre-deposit as defined in Section 35F. The appellant relied on a ruling by the Gujarat High Court and the Adjudicating Authority's findings.4. The appellant's counsel argued that the issue was settled by a Division Bench ruling in Parle Agro (P) Ltd. vs. Commissioner, CGST, following the Supreme Court's decision in Sandvik Asia Ltd. The Division Bench held that amounts deposited during investigation or pending litigation are considered pre-deposits, entitling the successful appellant to interest from the deposit date till the refund date.5. After considering the arguments, the appeal by the Revenue was dismissed, and the Adjudicating Authority was directed to disburse interest at 12% per annum within 45 days from the order date, following the Division Bench's decision in Parle Agro (P) Ltd. This judgment reaffirmed that interest is payable on amounts deposited during investigation or pending litigation to successful appellants.