2026-VIL-1708-CESTAT-KOL-ST
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SERVICE TAX CESTAT Cases

Service Tax – Interest on refund of amounts deposited during investigation – Respondent deposited the amounts during the course of investigation in 2008-2009. The Tribunal later allowed the Respondent's appeal and set aside the confirmed demand. The Revenue's appeal before the Apex Court was dismissed. The refund was sanctioned only in 2024, after more than 16 years from the date of deposit. The Commissioner (Appeals) held that the Respondent is eligible for interest on the refund from the date of deposit till the refund is granted. The Revenue contended that interest, if any, is payable only for the refund claim filed after the issue was finalised at the Apex Court level – Whether the Respondent is entitled to interest on the refund of the deposited amounts from the date of deposit till the date of refund - HELD - The deposits were made in 2008 and the refund was sanctioned only in 2024. The Tribunal had set aside the confirmed demand. This means that the deposit collected from the Respondent was not liable to be paid by it right from day one. After the Tribunal's decision, the Revenue took another 4 years before the Apex Court, which dismissed its appeal. This affirms the decision of the Tribunal holding that the confirmed demand is illegal ab initio. Therefore, the Revenue cannot keep the money belonging to the Respondent from 2008 and return the same without any interest in 2024. The Bench followed its recent decision, which had considered the decisions of the Apex Court in Ranbaxy Laboratories and Sandvik Asia, the High Court decision in Riba Textiles, and the Tribunal decision in Berger Paints. Those decisions hold that the Revenue is liable to pay interest on amounts wrongly withheld from the assessee. The ratio laid down in the said decision is squarely applicable to the facts of the present case - The order of the Commissioner (Appeals) granting interest on the refund from the date of deposit is upheld and the appeal filed by the Revenue is dismissed
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