2026-VIL-680-DEL-ST
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SERVICE TAX High Court Cases

Service Tax - Interest on Refund - The Appellant deposited an amount under protest during investigation. Subsequent SCNs proposed recovery of service tax which was ultimately set aside by the Tribunal - Appellant sought refund of the deposited amount along with interest and contended that it was entitled to interest at 12% per annum - Whether an assessee is entitled to interest at a rate higher than the statutory rate of 6% per annum on an amount deposited during investigation and subsequently refunded following setting aside of the demand – HELD - There is no dispute that the amount deposited by the Appellant became refundable consequent upon the order of the Tribunal setting aside the demand. The Tribunal has treated the amount deposited during investigation as being in the nature of a pre-deposit for the purposes of Section 35FF of the Act. The Appellant has not been able to demonstrate that the Tribunal committed any error in applying Section 35FF of the Act or the notification issued thereunder - Where Parliament has enacted a complete statutory mechanism governing payment of interest and authorized the Central Government to notify the applicable rate, the entitlement of an assessee must necessarily be determined in accordance with the statutory framework. It is settled law that where the statute itself creates the right to interest and prescribes the rate at which such interest is payable, the entitlement cannot ordinarily travel beyond the statute itself - Once it is found that interest has been granted strictly in accordance with Section 35FF of the Act and the notification issued thereunder, this Court cannot, in exercise of appellate jurisdiction under Section 35G of the Act, enhance the statutory rate of interest, merely because the Appellant considers it to be inadequate - The reliance placed on Sandvik Asia Ltd. v. Commissioner of Income Tax-I, Pune is misplaced as that decision has been explained by the Supreme Court in Commissioner of Income Tax, Gujarat v. Gujarat Fluoro Chemicals Ltd., wherein it was clarified that an assessee is entitled only to such interest as is provided under the statute and that Sandvik Asia did not lay down any general principle entitling an assessee to claim interest dehors the statutory provisions - The appeal is dismissed
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