2026-VIL-1033-CAL-ST
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SERVICE TAX High Court Cases

Service Tax - Interest on delayed refund under Section 11BB - Relevant date for computing three-month period - Respondent executed turnkey drinking water supply and distribution project for Kerala Water Authority and paid service tax during dispute period. Later it was clarified laying water pipelines for public welfare project did not constitute taxable construction service. Respondent filed refund claims on 5 January 2012 and 20 March 2012. Department returned second claim as time-barred and rejected first claim. Tribunal allowed appeals and ordered refund - After subsequent deficiency memo and departmental processing refund was sanctioned on 6 January 2025. Respondent then sought interest under Section 11BB from original 2012 application dates. Revenue contended interest not payable as refund was sanctioned within three months of receiving complete documents - Whether interest is payable under Section 11BB when refund is sanctioned years after original applications and which date governs three-month period for interest computation - HELD - Interest under Section 11BB is automatic and statutory consequence of refund sanctioned beyond three months from date of application. Three-month period must be reckoned from date of original applications filed in 2012 not from date of Tribunal's order or date of subsequent submission of requested administrative documents - Respondent's letter dated 12 September 2024 was merely follow-up representation requesting implementation and cannot be construed as fresh application. Subsequent communication about submission of documents does not create new application date. Department's own correspondence and final refund sanction order explicitly reference 2012 application dates - Pendency of appellate proceedings does not postpone date from which interest runs. Amount deposited under mistake of law does not bear character of duty and does not partake nature of tax. Statutory interest rate cap of 6% under Notification No. 24/2014-CE (NT) is inapplicable to refunds arising from mistake of law - Tribunal's award of compensatory interest at 9% is just equitable and supported by High Court precedents - Tribunal correctly exercised powers under Rule 41 to ensure final order was not rendered otiose. Appeal under Section 35G not maintainable against procedural direction under Rule 41 – The Revenue appeal is dismissed
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