Interest on refunded service tax granted for wrongful retention of assessee's money pending refund.

Interest on refunded service tax was payable because the amount had been retained by the Revenue after payment under demand without a prior show cause notice, and the original demand and refund rejection were found unsustainable on the facts. Applying the settled rule that interest accrues when money legally due to the assessee is withheld beyond the permissible period, the Tribunal treated the relevant period as running from the date of payment until refund. The appellant was held entitled to interest at 6% per annum for that period.

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Issues: Whether the appellant was entitled to interest on the refunded service tax amount for the period during which the amount remained with the Revenue.

Analysis: The appellant had paid service tax under the Department's demand and the amount was retained until refund was ultimately sanctioned. The Tribunal found that no show cause notice had been issued before seeking to appropriate the amount, that the original demand and rejection of refund were unsustainable on the facts, and that the refund amount had been unlawfully held by the Revenue. In this setting, the Tribunal applied the settled principle that interest on refund is payable when money legally due to the assessee is withheld beyond the permissible period, and held that the relevant period for interest ran from the date of payment of the amount till the date of refund.

Conclusion: The appellant was held entitled to interest at 6% per annum from 30.08.2012 to 18.08.2021, and the appeal was allowed.

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