Custom, Excise & Service Tax Tribunal
Ms Harisons Industries vs Kolkata North Commissionerate on 3 July, 2025
IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
EASTERN ZONAL BENCH : KOLKATA
REGIONAL BENCH - COURT NO. 1
Service Tax Appeal No. 76006 of 2024
(Arising out of Order-in-Appeal No. 52/ST-KOL/ST/Kol-N/24-25 dated 25.04.2024
passed by the Commissioner of C.G.S.T. & C.X., Kolkata Appeals-I Commissionerate,
G.S.T. Bhawan, 180, Shantipally, Rajdanga Main Road, Kolkata - 700 107)
M/s. Harisons Industries : Appellant
Hastings Chambers, 7C, Kiran Shankar Roy Road,
Kolkata - 700 001
VERSUS
Commissioner of C.G.S.T. and Central Excise : Respondent
Kolkata North C.G.S.T. and C.X. Commissionerate,
G.S.T. Bhawan, 180, Shantipally, Rajdanga Main Road,
Kolkata - 700 107
APPEARANCE:
Shri Indranil Banerjee, Advocate, for the Appellant
Shri S.K. Jha, Authorized Representative, for the Respondent
CORAM:
HON'BLE SHRI K. ANPAZHAKAN, MEMBER (TECHNICAL)
FINAL ORDER NO. 76670 / 2025
DATE OF HEARING: 24.06.2025
DATE OF DECISION: 03.07.2025
ORDER:
The instant appeal has been filed by the appellant against the Order-in-Appeal No. 52/ST- KOL/ST/Kol-N/24-25 dated 25.04.2024 passed by the Commissioner of CGST & CX, Appeals-I, Kolkata, whereunder the appellant's appeal against the Order in C No. GEXCOM/RFD/ST/153/2022-CGST-DIV-BBD- I-COMMRT-KOLKATA(N)/8576 dated 16.02.2023 has been rejected on the ground that the said appeal was not maintainable. As a consequence of the same, the Page 2 of 22 Appeal No.: ST/76006/2024-SM appellant's claim for payment of interest on the refund of Rs. 33,73,971/- sanctioned to the appellant, was not allowed. Aggrieved by the rejection of their claim of interest, the appellant has filed this appeal.
2. The briefly stated facts of the case are that the appellant, as a proprietorship firm, has been engaged in providing horizontal directional drilling services enabling laying of cables, pipelines and works contract services for laying of pipelines/cables etc. During the period 2007-08 to 2011-12, the appellant had been registered with the Service Tax Department under the category of 'work contract services', 'site preparation and clearance services' and 'commercial or industrial construction services' etc. 2.1. Pursuant to investigations conducted into the activities of the appellant, a Show Cause Notice dated 17.10.2012 demanding service tax as computed therein, with interest and penalty after adjustment of service tax already paid. During the course of investigations the appellant had deposited Rs. 33,73,971/- towards their purported service tax liability and interest.
2.2. Thereafter, the said Show Cause Notice was adjudicated vide Order-in-Original dated 31.03.2014, whereunder the service tax liability to the tune of Rs. 1,93,01,617/- along with interest and penalties were confirmed. On appeal, the CESTAT, vide Final order bearing No. 75793/2021 dated 03.12.2021, allowed the appeal filed by the appellant. The said final order, has been accepted by the revenue, and hence the same attained finality.
Page 3 of 22Appeal No.: ST/76006/2024-SM 2.3. Pursuant to the aforesaid final order, the appellant applied for refund of Rs. 33,73,971/- deposited by them during the course of investigations. Vide Order-in-Original dated 05.07.2022, the aforesaid claim for refund of Rs. 33,73,971/- was allowed under Section 35F of the Excise Act read with paragraph No. 5.4 of the Circular No. 984/08/2014- CX dated 16.09.2014. However, the Departmental authority did not sanction interest on the aforesaid refunded amount, although there was no express rejection of such claim towards interest in the said Order-in-Original. The sanctioned refund of Rs.33,73,971/- has since been disbursed to the appellant.
2.4. On 05.09.2022, the appellant wrote to the Departmental authority concerned and requested for grant of interest on the refunded amount of Rs. 33,73,971/-. In its said letter dated 30.08.2022, which was filed on 05.09.2022, the appellant, inter alia, claimed interest on the aforesaid amount for the period from the date of deposit during the course of investigations until the date of actual refund. The said letter dated 30.08.2022 was, thereafter, followed up with another letter dated 31.10.2022, requesting for payment of interest on the sanctioned refund of Rs. 33,73,971/-.
2.5. On 16.02.2023 the Ld. Assistant Commissioner, BBD Bag-I Division, CGST & CX, Kolkata North Commissionerate passed an order with reference to the appellant's claim for grant of interest and informed them that the due refund has been sanctioned within 90 days from the date of receipt of the application concerned and that no interest was payable under Section 11BB of the Central Excise Act.
Page 4 of 22Appeal No.: ST/76006/2024-SM 2.6. Aggrieved by the aforesaid rejection of their claim for interest, the appellant preferred appeal before the Ld. Commissioner, Appeals-I, Kolkata, who vide the impugned order dated 25.04.2024, rejected the appellant's appeal. Hence, this appeal.
3. The Ld. Counsel appearing on behalf of the appellant submits that the impugned order has been passed in violation of the principles of natural justice. It is their contention that the ld. appellate authority has failed to appreciate that the appellant was entitled to grant of interest on the refund of Rs.33,73,971/-, since disbursed, and such interest ought to have been automatically paid.
3.1. It is submitted by the appellant that the ld. appellate authority erroneously faulted the appellant for not challenging the aforesaid Order-in-Original dated 05.07.2022; that the appellate authority failed to appreciate that, vide the said refund sanctioning order, the claim for interest had neither been rejected nor specifically adverted to and, in such circumstances it was unclear as to whether the said claim for payment of interest stood formally rejected.
3.2. It is also the appellant's contention that the Ld. Commissioner, CGST & CX, Appeals-1, Kolkata has erred by holding that the appeal filed by the appellant was not maintainable, as the appellant has not challenged Order-in-Original 01/R/CGST/BBD-I/KOL- North/2022-23 dated 05.07.2022; the appellant submits that the purported observations recorded in paragraph No. 6.0, page 5 of the impugned order are illegal, arbitrary and unsustainable; if the Assistant Commissioner, BBD Bag-I, Kolkata North Commissionerate was of the view that interest was Page 5 of 22 Appeal No.: ST/76006/2024-SM not payable, then he should have expressly recorded in the order that no interest was payable. However, there is no discussion at all in the said order dated 05.07.2022 as regards the payment of interest.
3.3. The appellant further submitted that the ld. appellate authority failed to appreciate that the appellant had been diligently pursuing the matter with the letters on 05.09.2020 and 07.11.2022, requesting the Department for granting of interest on the refunded amount of Rs. 33,73,971/-.
3.5. It is also the appellant's plea that as the Order- in-Original dated 05.07.2022 has not discussed the issue of interest, it cannot be considered as a speaking order with respect to interest; that the reasons for rejection of interest has been spelt out for the first time in the purported communication dated 16.02.2023 only and thus, the appellant has challenged the letter communicating the rejection of interest.
3.5. The appellant also submits that the ld. appellate authority ought to have referred to and abide by the provisions of Section 85 of the Finance Act, 1994 whereunder any decision or order passed by an adjudicating authority can be challenged in appeal; the Ld. Commissioner of CGST & CX, Appeals-1, Kolkata committed a grave error by failing to discuss the provisions of Sections 11B, 11BB, 35F and 35FF of the Excise Act, as applicable under Section 83 of the Finance Act, 1994.
3.6. Moreover, it is stated by the appellant that on merit their claim for payment of interest deserved to be allowed and the ld. appellate authority has erred in holding to the contrary and rejecting the appellant's Page 6 of 22 Appeal No.: ST/76006/2024-SM appeal on a hyper-technical ground; accordingly, the appellant prayed for allowing interest.
3.7. It is also submitted by the appellant that it is trite law that when the Department had illegally retained an amount from a taxpayer which it had no authority to recover, then the amount illegally retained must be refunded back to the taxpayer along with interest, notwithstanding the absence of any specific statutory provisions granting payment of interest. Thus, the appellant submits that they are entitled for granting of interest @ 12% per annum from the date of deposit during the course of investigation till the date of refund.
3.8. In view of these submissions, the Ld. Counsel for the appellant prayed for granting interest @ 12% per annum from the date of deposit during the course of investigation till the date of refund.
4. The Ld. Authorized Representative of the Revenue submits that the refund has been granted within 90 days from the date of application for refund and hence the ld. adjudicating authority and appellate authority has rightly rejected the claim of interest made by the appellant.
5. Heard both sides and perused the appeal records.
6. I find that the in this case, appellant had deposited Rs. 33,73,971/- towards their purported service tax liability during the course of investigations. The service tax liability of the appellant has been decided by the CESTAT, vide Final order No. 75793/2021 dated 03.12.2021, whereby the appeal filed by the appellant was allowed, with consequential Page 7 of 22 Appeal No.: ST/76006/2024-SM relief. I also observe that said final order has been accepted by the Revenue and hence, attained finality.
6.1. Pursuant to the aforesaid final order, the appellant applied for refund of Rs. 33,73,971/- deposited by them during the course of investigations. Vide Order-in-Original dated 05.07.2022, the aforesaid claim for refund of Rs. 33,73,971/- was allowed under Section 35F of the Excise Act read with paragraph No. 5.4 of the circular No. 984/08/2014-CX dated 16.09.2014. However, the Departmental authority did not sanction interest on the aforesaid refunded amount, although there was no express rejection of such claim towards interest ninth said Order-in-Original.
6.2. In this regard, I observe that the Department has issued categorical instructions regarding refund of pre-deposit made under section 35F of the Central Excise Act, 1944 made applicable to Service Tax matters vide Section 83 of the Finance Act, 1994, along with interest. In the present case, the issue involved is refund of amount deposited during the course of investigation, which is considered as redeposit by various Tribunals and Courts. In such cases, the jurisdictional Central Excise Officers are not required to wait for instructions from any superior officers or to look for instructions in the orders of higher appellate authority for grant of interest on such refunds.
6.4. In the present case, admittedly, the appellant had deposited Rs. 33,73,971/- towards their purported service tax liability during the course of investigations. In view of the Final order No. 75793/2021 dated 03.12.2021 of this Tribunal, allowing the appeal filed Page 8 of 22 Appeal No.: ST/76006/2024-SM by the appellant with consequential relief, there is no service tax liability payable by the appellant. Thus, the amount paid by the appellant during investigation takes the shape of a 'pre deposit' made during investigation and not service tax payment. Thus, I find that the provisions of section 11B of the Central Excise Act, 1944 made applicable to service tax matters by Section 83 of the Finance Act, 1994 are not attracted for the refund of the amount predeposited during the course of investigation. Once, the appellant succeeds in his appeal, the amount prdeposited is to be returned to the appellant along with interest. There is no need for filing any application for this refund as provided under Section 11B of the Central Excise Act, 1944. Refund of the amount deposited along with interest is payable automatically.
6.5. I find that this view has been held by the Hon'ble Karnataka High Court in the case of Commissioner of C.Ex., Bangalore v. KVR Construction [2012 (26) S.T.R. 195 (Kar.)]. The relevant part of the said decision are reproduced below:
"17. If this Court ultimately concludes that Section 11B of the Act is applicable to the facts of the present case, then, the argument of the learned Counsel for the appellant that Writ Petition was not maintainable would merit consideration. Therefore, at this stage, we will not consider the matter regarding maintainability of the Writ Petition, as first we have to look to the provisions of 11B of the Act and then decide whether Section 11B is applicable to the facts of the case as finding thereon would have bearing for considering the issue of maintainability of Writ Petition. Section 11B of the Central Excise Act reads as under :
"11B. Claims for refund of duty : (1) Any person claiming refund of any duty of excise may make an application for refund of such duty to the Assistant Commissioner of Central Page 9 of 22 Appeal No.: ST/76006/2024-SM Excise or Deputy Commissioner of Central Excise before the expiry of one year from the relevant date in such form and manner as may be prescribed and the application shall be accompanied by such documentary or other evidence (including the document referred to in Section 12A) as the applicant may furnish to establish that the amount of duty of excise in relation to which such refund is claimed was collected from, or paid by, him and the incidence of such duty had not been passed on by him to any other person."
18. From the reading of the above Section, it refers to claim for refund of duty of excise only, it does not refer to any other amounts collected without authority of law. In the case on hand, admittedly, the amount sought for as refund was the amount paid under mistaken notion which even according to the department was not liable to be paid.
19. According to the appellant, the very fact that said amounts are paid as service tax under Finance Act, 1994 and also filing of an application in Form-R of the Central Excise Act would indicate that the applicant was intending to claim refund of the duty with reference to Section 11B, therefore, now it is not open to him to go back and say that it was not refund of duty. No doubt in the present case, Form- R was used by the applicant to claim refund. It is the very case of the petitioner that they were exempted from payment of such service tax by virtue of circular dated 17-9-2004 and this is not denied by the Department and it is not even denying the nature of construction/services rendered by the petitioner was exempted from to payment of Service Tax. What one has to see is whether the amount paid by petitioner under mistaken notion was payable by the petitioner. Though under Finance Act, 1994 such service tax was payable by virtue of notification, they were not liable to pay, as there was exemption to pay such tax because of the nature of the institution for which they have made construction and rendered services. In other words, if the respondent had not paid those amounts, the authority could not have demanded the petitioner to make such payment. In other words, authority lacked authority to levy and collect such service tax. Incase, the department were to demand such payments, petitioner could have challenged it as Page 10 of 22 Appeal No.: ST/76006/2024-SM unconstitutional and without authority of law. If we look at the converse, we find mere payment of amount, would not authorize the department to regularise such payment. When once the department had no authority to demand service tax from the respondent because of its circular dated 17-9-2004, the payment made by the respondent company would not partake the character of "service tax" liable to be paid by them. Therefore, mere payment made by the respondent will neither validate the nature of payment nor the nature of transaction. In other words, mere payment of amount would not make it a "service tax" payable by them. When once there is lack of authority to demand "service tax" from the respondent company, the department lacks authority to levy and collect such amount. Therefore, it would go beyond their purview to collect such amount. When once there is lack of authority to collect such service tax by the appellant, it would not give them the authority to retain the amount paid by the petitioner, which was initially not payable by them. Therefore, mere nomenclature will not be an embargo on the right of the petitioner to demand refund of payment made by them under mistaken notion.
20. In the case of Hind Agro Industries Ltd. v. Commissioner of Customs reported in 2008 (221) E.L.T. 336 (Del.), it was the case where cess amount was paid under protest by the appellants. In that case after referring to Mafatlal Industries case (supra), the lordships of Delhi High Court have held that in Mafatlal Industries case, Hon'ble Supreme Court was dealing with the case of refund of duty payable within the meaning of either the Central Excises and Salt Act, 1944 or the Customs Act, 1962 as the case may be, wherein they have held that all claims for refund ought to be filed only in accordance with the Customs Act. Therefore, it did not include the payment made under some other enactment, which for some reason had erroneously been made to the Customs authorities. Even otherwise by referring to paragraph 137 of Mafatlal Industries case, one has to see whether the amount claimed is unconstitutional and outside the provisions of Section 11B of the Act.
21. In the case of Nataraj and Venkat Associates (supra), this was pertaining to service tax wherein Page 11 of 22 Appeal No.: ST/76006/2024-SM petitioner company was dealing in architectural services and paid service tax for the construction of the building carried on at Sri Lanka and contended it would not have attracted levy of service tax. In other words, there was an application for refund of said tax and the question that arose therein was what is the relevant date for the commencement of the period of limitation for the purpose of Section 11B and was held that it would be the date of payment of duty. It was held in the paid case that amounts paid cannot be taken to be duty of excise, therefore bar of limitation under Section 11B cannot be applied because such limitation would come in the way of any person claiming refund of any duty of excise and interest.
22. In the case of Commissioner of Central Excise, Bangalore v. Motorola India Pvt. Ltd. (supra) the Division Bench of this Court considered similar issue. It was a case where excess amount was paid over duty under Central Excise Act on the direction of the Department. There was an application for refund of amount and the same came to be rejected by the Assistant Commissioner on the ground of lapse of time. It was confirmed by both the Appellate Authority and also the Tribunal. Aggrieved by the order of the Tribunal, revenue came up before the High Court. Their lordships of the Division Bench held that order of the Tribunal to allow the claim on the basis that amount paid by mistake cannot be termed as duty in the said case was justified and therefore applying the law laid down in the decision of Apex Court in the case of India Cements Ltd. v. Collector of Central Excise - 1989 (41) E.L.T. 358, dismissed the appeal.
23. Now we are faced with a similar situation where the claim of the respondent/assessee is on the ground that they have paid the amount by mistake and therefore they are entitled for the refund of the said amount. If we consider this payment as service tax and duty payable, automatically, Section 11B would be applicable. When once there was no compulsion or duty cast to pay this service tax, the amount of Rs. 1,23,96,948/- paid by petitioner under mistaken notion, would not be a duty or "service tax" payable in law. Therefore, once it is not payable in law there was no authority for the department to retain such amount. By any stretch of imagination, it will not amount to duty of excise to Page 12 of 22 Appeal No.: ST/76006/2024-SM attract Section 11B. Therefore, it is outside the purview of Section 11B of the Act.
24. The learned Counsel for the appellant has also contended that when the order of refund was rejected, the respondent could have approached this Court instead of filing the appeal choosing a wrong forum, could not be a deficit coming in the way to claim refund.
25. However, the petitioner has not approached the Tribunal after the order passed by 1st appellate authority and they have approached this Court. Therefore, even the provisions of Section 35B(1)(b) would not be applicable. From the facts of the case as discussed herein above, it emerges that petitioner has approached this Court contending that Section 11B is not applicable as there was no duty cast on them to pay "service tax" and they have paid such amount under mistaken notion. Viewed from nay angle, we are of the opinion that the learned Single Judge was justified in setting aside that portion of the order which rejected the claim of refund and accordingly same is confirmed.
26. Accordingly, the appeals are dismissed. The concerned appellant authority is directed to refund the amounts as directed by the learned single judge within an outer limit of six weeks from the date of receipt of copy of this order."
6.6. The same view has been held by the Tribunal, Larger Bench in the case of Credible Engineering v. Commissioner of Customs and Central Excise, which has been upheld by the Hon'ble Telangana High Court [Central Excise Appeal No. 03 of 2023 vide judgement dated 15.04.2024 - Telangana High Court]. The relevant part of the said decision rendered by the Hon'ble Telangana High Court is reproduced below:
"3. This appeal filed under Section 35G of the Central Excise Act, 1944 (for short "the Act, 1944") takes exception to the order dated 05.09.2022 passed in Service Tax Appeal No.30781 of 2018 by the Customs, Excise and Service Tax Appellate Page 13 of 22 Appeal No.: ST/76006/2024-SM Tribunal, Regional Bench at Hyderabad (Tribunal), whereby the appeal filed by the respondent was allowed by the said Tribunal.
4. It was pointed out that the respondent worked pursuant to 'Works Contract' between the period from 30.09.2012 to 30.06.2014 and paid service tax arising thereto. On 10.02.2017, it filed an application for refund of Service Tax of Rs.1,60,81,347/- by contending that under the Act, 1944 it was not liable to pay the tax and tax was paid as a mistake of law. The said application was dismissed on 05.06.2017 by the Assistant Commissioner of Customs, Central Excise & Service Tax, Hyderabad.
5. Aggrieved by the said order, the respondent- company preferred an appeal, which came to be dismissed on 28.02.2018 by the Commissioner of Customs and Central Tax (appeals-I), Hyderabad. The respondent then approached the Customs, Excise & Service Tax Authority by filing Service Tax Appeal No.30781 of 2018.
6. During the course of hearing, it is pointed out that there was a cleavage of opinion amongst the Members of the Tribunal regarding the aspect of limitation as per Section 11B of the Act, 1944. Resultantly, the matter was sent for obtaining another opinion of Third Member. The learned Third Member opined that when tax was paid as a mistake of law, the limitation under Section 11B of the Act, 1944 is not a hurdle for refund of tax. In view of majority opinion, the impugned decision was taken by holding that Section 11B of the Act, 1944, cannot be pressed into service, in a case of this nature where tax itself is admittedly paid as a mistake of law.
7. Mr.Dominic Fernandes, learned counsel for the appellant fairly submits that he is proposing only one substantial question of law i.e., "whether, while processing/considering a claim for refund, the limitation contemplated under Section 11B of the Excise Act, made applicable to service tax under Section 83 of the Finance Act, 1994 would be applicable or inapplicable, in a case where any amount even though it is not payable as service tax, is voluntarily paid by the assessee?"Page 14 of 22
Appeal No.: ST/76006/2024-SM
8. To elaborate, he placed reliance on the judgment of the Hon'ble Supreme Court in Mafatlal Industries Ltd. v Union of India 1. He submits that in the light of this judgment, the Tribunal has committed an error of law 1997 (89) E.L.T.247 (S.C.) which has given rise to the aforesaid substantial question of law. The other side raised objection.
9. We have heard the matter at length. It is seen that the single question raised by Mr. Dominic Fernandes, learned counsel is no more res integra. In the manner proposed question is framed, it is not in dispute that service tax was not payable by the assessee. This question came up for consideration before the Delhi High Court in Hind Agro Industries Limited v. Commissioner of Customs 2. After considering the judgment of the Hon'ble Supreme Court in case of Mafatlal Industries Ltd. (supra 1), the Delhi High Court held that the judgment of Mafatlal Industries Ltd. (supra) nowhere talks of a situation where the refund of a tax paid under the relevant Act albeit erroneously was required to be made under the Excise Act or the Customs Act and under no other enactment. It was clearly held that judgment of Mafatlal Industries Ltd. (supra 1) is of no 2008 (221) ELT 336 (Del.) assistance in a case where tax is erroneously paid as a mistake of law.
10. The Tribunal has also taken note of the judgment of Karnataka High Court in Commr. of C.Ex. (Appeals), Bangalore v. KVR Construction 3. The Karnataka High Court also considered the judgment of Delhi High Court in case of Hind Agro Industries Limited (supra 2) and the judgment of Mafatlal Industries Ltd. (supra 1) and in no certain terms made it clear that where the tax is admittedly paid as a mistake of law, the limitation will not come in the way for refund.
11. It is pointed out by both sides that the judgment of Karnataka High Court in case of KVR Construction's (supra 3) was unsuccessfully challenged before the Hon'ble Supreme Court and SLP was dismissed on 11.07.2011 which is taken note of by the Tribunal.
12. The judgment of this Court in Vasudha Bommireddy v. Assistant Commissioner of S.T., 2012 (26) S.T.R. 195 (Kar.) Hyderabad 4 was relied upon by other side by contending that the judgment Page 15 of 22 Appeal No.: ST/76006/2024-SM of Karnataka High Court in KVR Construction (supra
3) was considered and this Court also held that when a tax is paid as a mistake of law, the embargo of limitation will not come in the way of claim of refund.
13. We have gone through the aforesaid judgments of the Delhi, Karnataka and the judgment of this Court in case of Vasudha Bommireddy (supra 4). The common string in all the above judgments is that if the contractor was not liable to pay tax, the department cannot retain the amount paid and in that view of the matter, bar of limitation under Section 11B of the Act, 1944 cannot be pressed into service.
14. In this view of the matter, in our opinion, no substantial question of law subsists and needs to be answered, because curtains are already drawn on this issue by various High Courts. Thus, admission is declined."
6.7. Thus, by relying on the decisions cited supra, the impugned order rejecting the appeal filed by the appellant on the ground of maintainability is not sustainable and hence I set aside the same. I hold that the appellant are entitled for granting of interest from the date of deposit during the course of investigation till the date of refund.
6.8. Regarding the rate of interest payable, the appellant has cited the decisions in the case of Sandvik Asia and claimed interest @12%. The relevant portion of the decision of the Apex Court‟s judgement in the case of Sandvik Asia Ltd vs Commissioner Of Income Tax-I, Pune & Ors - Order dated 27 January, 2006, is reproduced below:
"A. Whether in view of binding decisions of this Court the respondents are estopped from urging that compensation as claimed by the appellant is not payable by them? And therefore whether the Bombay High Court erred in allowing them to urge such a contention in the impugned judgment?Page 16 of 22
Appeal No.: ST/76006/2024-SM B. Assuming for the sake of argument that there is no provision in the Income-tax Act, 1961 ("the Act") for grant of such compensation, this Court had upheld the view of the Gujarat & Madhya Pradesh High Courts that compensation should be granted (whether called interest or otherwise) and hence the impugned judgment was contrary to a decision of this Court and ought to be reversed?
...
E. Whether the High Court ought to have held that sections 240 and 244 of the Act refer to 'refund of any amount', which phrase clearly includes any amount (including interest) due by the Income Tax department to the assessee, and hence the appellant was entitled to interest on the delay in the payment of amounts due from the Income-tax department ?
....
243. Interest on delayed refunds.
(1) If the Income-tax Officer does not grant the refund
(a) in any case where the total income of the assessee does not consist solely of income from interest on securities or dividend, within three months from the end of the month in which the total income is determined under this Act, and
(b) in any other case, within three months from the end of the month in which the claim for refund is made under this Chapter, the Central Government shall pay the assessee simple interest at (twelve) per cent per annum on the amount directed to be refunded from the date immediately following the expiry of the period of three months aforesaid to the date of the order granting the refund.
Explanation : If the delay in granting the refund within the period of three months aforesaid is attributable to the assessee, whether wholly or in part, the period of the delay attributable to him shall be excluded from the period for which interest is payable.
244. Interest on refund where no claim is needed. (1) Where a refund is due to the assessee in Page 17 of 22 Appeal No.: ST/76006/2024-SM pursuance of an order referred to in section 240 and the Income-tax Officer does not grant the refund within a period of [three months from the end of the month in which such order is passed], the Central Government shall pay to the assessee simple interest at [twelve] per cent per annum on the amount of refund due from the date immediately following the expiry of the period of [three] months aforesaid to the date on which the refund is granted.
.....
We have given our anxious and thoughtful consideration on the elaborate submissions made by counsel appearing on either side. In our opinion, the High Court has failed to notice that in view of the express provisions of the Act an assessee is entitled to compensation by way of interest on the delay in the payment of amounts lawfully due to the appellant which were withheld wrongly and contrary to the law by the Department for an inordinate long period of up to 17 years.
.....
In our view, there is no question of the delay being 'justifiable' as is argued and in any event if the revenue takes an erroneous view of the law, that cannot mean that the withholding of monies is 'justifiable' or 'not wrongful'. There is no exception to the principle laid down for an allegedly 'justifiable' withholding, and even if there was, 17 (or 12) years delay has not been and cannot in the circumstances be justified.
...
At the initial stage of any proceedings under the Act any refund will depend on whether any tax has been paid by an assessee in excess of tax actually payable to him and it is for this reason that Section 237 of the Act is phrased in terms of tax paid in excess of amounts properly chargeable. It is, however, of importance to appreciate that section 240 of the Act, which provides for refund by the Revenue on appeal etc., deals with all subsequent stages of proceedings and therefore is phrased in terms of 'any amount' becoming due to an assessee.
The facts and the law referred to in paragraph (supra) would clearly go to show that the appellant Page 18 of 22 Appeal No.: ST/76006/2024-SM was undisputably entitled to interest under Sections 214 and 244 of the Act as held by the various High Courts and also of this Court. In the instant case, the appellant's money had been unjustifiably withheld by the Department for 17 years without any rhyme or reason. The interest was paid only at the instance and the intervention of this Court in Civil Appeal No. 1887 of 1992 dated 30.04.1997. Interest on delayed payment of refund was not paid to the appellant on 27.03.1981 and 30.04.1986 due to the erroneous view that had been taken by the officials of the respondents. Interest on refund was granted to the appellant after a substantial lapse of time and hence it should be entitled to compensation for this period of delay. ...
....It is a case of the appellant as set out above in the instant case for the assessment year 1978-79, it has been deprived of an amount of Rs.40 lakhs for no fault of its own and exclusively because of the admittedly unlawful actions of the Income Tax Department for periods ranging up to 17 years without any compensation whatsoever from the Department. Such actions and consequences, in our opinion, seriously affected the administration of justice and the rule of law.
There cannot be any doubt that the award of interest on the refunded amount is as per the statute provisions of law as it then stood and on the peculiar facts and circumstances of each case. When a specific provision has been made under the statute, such provision has to govern the field. Therefore, the Court has to take all relevant factors into consideration while awarding the rate of interest on the compensation.
This is the fit and proper case in which action should be initiated against all the officers concerned who were all in charge of this case at the appropriate and relevant point of time and because of whose inaction the appellant was made to suffer both financially and mentally, even though the amount was liable to be refunded in the year 1986 and even prior to. A copy of this judgment will be forwarded to the Hon'ble Minister for Finance for his perusal and further appropriate action against the erring officials on whose lethargic and adamant attitude the Department has to suffer financially."
Page 19 of 22Appeal No.: ST/76006/2024-SM 6.9. I find that the same view has been held by the Hon'ble Calcutta High Court in the case of Rajendra Kumar Jain v. Commissioner of Customs (Port), Kolkata & anr. [CUSTA/3/2012 vide judgement dated 09.05.2024 - Calcutta High Court]. The relevant observations of the Hon'ble High Court are reproduced below: -
"9. Learned senior standing counsel for the respondents now states that the Government of India, Ministry of Finance (Department of Revenue), New Delhi has issued a notification No. 70/2014/Customs (N.T.) dated 12.08.2014 in exercise of powers conferred under Section 129EE of the Customs Act, 1962 fixing the rate of interest @ 6% per annum for the purposes of the said Section and, therefore, the same rate of interest is applicable. We do not find any substance in this submission of learned senior standing counsel for the respondents. Reason is that the said notification is dated 12.08.2014. The rate of interest on delayed refund of pre-deposit shall be governed by the law laid down by Hon'ble Supreme Court in ITC Limited (supra) as well as a coordinate Bench of this Court in Madura Coats Private Limited (supra) till statutory provision in the Act was enacted and a notification was issued thereunder providing for rate of interest on delayed refund of pre-deposit. With effect from the date on which the provision came in the statute, it shall hold the field and the rate of interest shall be governed by it. Since the period in question is prior to the notification providing for rate of interest on delayed refund of pre-deposit, issued under the Act, therefore, the case of the appellant shall be governed by the law laid down by the coordinate Bench of this Court in Madura Coats Private Limited (supra).
10. For all the reasons afore stated, the appeal is allowed, the impugned order No. A-34/KOL/2012 dated 23.01.2012 in Customs Appeal No.C/A/231/2006 [Shri Rajendra Kumar Jain v.
Commissioner of Customs (Port), Kolkata) passed by the Customs, Excise and Service Tax Appellate Tribunal, East Zonal Bench, Kolkata is hereby set aside and it is held that the appellant is entitled for payment of interest 12% on the delayed refund of Page 20 of 22 Appeal No.: ST/76006/2024-SM the amount of pre-deposit, which shall be paid by the respondents to the appellant within one month from the date of production of a certified copy of this order. The substantial question of law is answered in negative ie. in favour of the appellant and against the respondents."
6.10. As per the decision of the Hon'ble Apex Court cited supra, interest at the rate of 12% is payable when the amount deposited during the course of investigation is refunded later. The same view has been taken in the following decisions: -
(i) Green Valley Indusries Ltd. v. Commissioner of C.G.S.T. & C.Ex. [2022-TIOL-3108-
CESTAT-KOL]
(ii) Riba Textiles Ltd. v. Commissioner of C.Ex.
& S.T., Panchkula [2020-TIOL-932-CESTAT- CHD]
(iii) Commissioner of C.Ex., Panchkula v. Riba Textiles Ltd. [2022-TIOL-382-HC-P&H-CX]
(iv) Parle Agro Pvt. Ltd. v. Commissioner, C.G.S.T., Noida [2022 (380) E.L.T. 219 (T)]
(v) Shri Nakoda Ispat Ltd. & ors. v.
Commissioner of Cus., C.Ex. & S.T., Raipur [Final Order Nos. 50710-50714 of 2022 dated 22.08.2022 in Excise Appeal No. 51050 of 2022 & ors. - CESTAT, New Delhi] 6.11. Thus, by following the decisions cited supra, I hold that the appellant is liable to be paid the refund along with interest @12%.
Page 21 of 22Appeal No.: ST/76006/2024-SM
7. In the present case, I find that the Ld. adjudicating authority passed the Order-in-Original dated 05.07.2022, sanctioning the refund. He should have sanctioned the interest along with the refund. However, he has not discussed the issue of interest and hence I find that the said order cannot be considered as a speaking order with respect to interest. In this regard, I observe that the ld. adjudicating authority has given his reasons for not granting interest vide his letter dated 16.02.2023. Thus, under these circumstances, since the reasons for rejection of interest had been spelt out for the first time in the purported communication dated 16.02.2023, the appellant challenged the letter communicating the rejection of interest. Hence, I do not find any merit in the impugned order passed by the Commissioner (Appeals) in rejecting the appeal as not maintainable. Further, I observe that while granting refund, interest is automatically payable along with the refund. If interest is not granted automatically, there is no time limit fixed for claiming the interest. Thus, I find that the impugned order rejecting the appeal filed by the appellant on the ground of maintainability is not sustainable and hence I set aside the same.
8. In view of the above discussions, I pass the following order:
(i) I hold that the impugned order, rejecting the appeal filed by the appellant on the ground of maintainability, is not sustainable and hence I set aside the same.Page 22 of 22
Appeal No.: ST/76006/2024-SM
(ii) I hold that the appellant are entitled to grant of interest @ 12% per annum from the date of deposit during the course of investigation till the date of refund.
9. The appeal filed by the appellant is disposed on the above terms.
(Order pronounced in the open court on 03.07.2025) Sd/-
(K. ANPAZHAKAN) MEMBER (TECHNICAL) Sdd