2026 (1) TMI 654 - AT - Service Tax

Interest on Deposited Amounts Refunded: entitlement from date of deposit until refund, awarded at 12% p.a.

Whether the appellant is entitled to interest on amounts deposited and subsequently refunded: applying the principle laid down by the SC in Sandvik Asia ... Entitlement to claim interest on the amount of deposit - Effective date - time barred - Pre-deposit in view of Section 35E - Demand of Service Tax - received amount from their clients for providing services but not declared it in their ST-3 returns filed during the material time - HELD THAT:- Relying upon the law laid down by Hon'ble Apex Court in the case of Sandvik Asia Limited. [2006 (1) TMI 55 - SUPREME COURT], the Tribunal has observed that as the Hon'ble Apex Court answered the issue holding that the assessee is entitled to claim interest from the date of payment of initial amount till the date of its refund, therefore, the appellants, in the instant case, are entitled to claim interest on delayed payment of amount from the date of its deposition till its realization. The interest on the said delayed refund is also payable at the rate of 12% as held by Hon'ble Kerala High Court in the case of Sony Pictures Networks India Pvt. Limited. [2017 (5) TMI 864 - KERALA HIGH COURT] This Tribunal is bound by the law laid down by Hon'ble Supreme Court in Sandvik Asia Limited vs. Commissioner of Income Tax & Ors. (supra). Therefore, the appellant is entitled to claim interest on the amount of deposit from the date of deposit till its refund at the rate of 12% per annum as held by Hon'ble Kerala High Court in the case of Sony Pictures Networks India Pvt. Limited (supra). Appeal is allowed in the above terms. Issues: (i) Whether the appellant is entitled to interest on the pre-deposit amount from the date of deposit until its refund and, if so, at what rate.Analysis: The Tribunal applied the Supreme Court principle that where revenue has unjustifiably retained an assessee's funds the assessee is entitled to interest for the period of retention. The Tribunal considered precedent limiting the appropriate rate of interest to 12% per annum in the absence of a statutory rate, and relied on decisions applying that principle to pre-deposits and delayed refunds. The statutory context included provisions under the Finance Act, 1994 and provisions concerning pre-deposits and refunds under the Central Excise Act, 1944, as they relate to recovery, refund and interest claims.Conclusion: The appellant is entitled to interest on the deposited amount from the date of deposit until its refund at the rate of 12% per annum in favour of the assessee.