Contractual tax reimbursement and delayed payment justified reasonable interest despite no express interest clause.

Contractual reimbursement of service tax was supported by challans, debit notes and invoices, and those documents were sufficient proof under the contracts. The respondent's ability to take CENVAT credit confirmed that reimbursement should have followed once the evidence was furnished. Although the contracts did not expressly provide for interest, the delayed payment in a commercial transaction justified reasonable interest as damages, and the court exercised equitable discretion under Section 34 of the Code of Civil Procedure. The refusal to grant any interest was not sustained, and the decree was modified to award reasonable interest on the reimbursed amount.

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Issues: Whether the appellant was entitled to interest for delayed reimbursement of service tax paid under the contracts, and whether the absence of Form VCES-3 in the initial stage disentitled the appellant from such relief.

Analysis: The contracts required reimbursement of service tax on production of documentary evidence. The challans, debit notes and supporting invoices furnished by the appellant constituted the requisite proof, and the materials on record showed that the respondent could avail CENVAT credit on that basis. The subsequent clarification of the service tax authorities and the respondent's eventual availing of credit confirmed that the reimbursement ought to have followed once the documents were furnished. Although the contract did not expressly provide for interest, the claim was one in the nature of damages for delayed payment in a commercial transaction, and the Court exercised its discretion on equitable principles under Section 34 of the Code of Civil Procedure, 1908.

Conclusion: The appellant was entitled to interest for the delayed reimbursement, and the denial of any interest by the court below was not sustained.

Final Conclusion: The decree was modified to grant the appellant reasonable interest on the reimbursed service tax amount, and the appeal was allowed accordingly.

Ratio Decidendi: Where contractual reimbursement of tax is supported by the required documentary evidence and the recipient is able to take corresponding credit, delayed reimbursement in a commercial transaction may justify an award of reasonable interest even in the absence of an express contractual stipulation.

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