2026-VIL-1216-CESTAT-KOL-ST
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SERVICE TAX CESTAT Cases

Service Tax - Refund - Entitlement to interest on illegally collected amount - The appellant, employed as Manager-Corporate Communication, was directed to pay service tax on the ground that she was providing management or business consultancy service, which she paid under duress without any show cause notice being issued - Appellant thereafter filed a refund claim on the ground that the service tax was not payable as her annual income in each financial year was below the threshold limit, though the demand letter had wrongfully clubbed income from four years to create a fictitious liability - The adjudicating authority ultimately sanctioned the refund holding that the appellant was not liable to pay service tax - Whether the appellant is entitled to interest on the illegally collected service tax amount and from what date such interest should be calculated – HELD - The appellant is entitled to interest because once the revenue determined that no service tax was payable, the collection itself was illegal ab initio, and the revenue had wrongfully retained the amount without issuing any show cause notice to appropriate it - Further, the non-issuance of SCN rendered the entire subsequent rejection of refund claim void ab initio, and the delay of more than three years in completing de-novo proceedings after remand constituted gross violation of statutory provisions and principles of natural justice - When money is unjustifiably withheld by the department in an illegal manner, the assessee is entitled to compensation by way of interest. The assessee's money which has been illegally exacted should attract interest from the date of such illegal exaction till the date of actual refund, not merely from the date of final order - Accordingly, the respondent are directed to pay interest at 6% per annum from the date of illegal payment till the date of refund grant - The appeal is allowed
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