Service tax paid in anticipation of services to be received from India, permission sought from RBI was rejected. Claim for refund along with interest filed. The Revenue rejected the refund for want of adequate documents, interest also was denied. Held that if requisite conditions fulfilled, assessee was entitled to interest in addition to refund of tax.

The assessee paid service tax of Rs.1.02 crore in anticipation of receipt of permission from RBI for import of intellectual property service. Since permission was not granted, the assessee filed a claim of refund for the service tax paid since no services were actually imported. The refund claim was rejected by the Revenue on the ground of inadequate documentary evidences. However, the Commissioner (Appeals) decided that the assessee actually furnished all the requisite documents and directed the assessee to refurnish all the relevant documents and directed the Adjudicating Authority to decide the refund claim in a month’s time along with interest u/s.11BB. The refund claim was sanctioned but interest on such refund was denied on the grounds that documents were submitted only during the hearing. The appellant contended that once the refund claim is allowed, the entitlement of interest is statutory and that he had filed the relevant documents with the Adjudicating Authority within the specified time limit.

Held:

It was held that the order passed by the Commissioner (Appeals) specifically mentioned ‘interest payable u/s.11BB’. As per section 11BB, if any duty is ordered to be refunded, and if it is not refunded within three months from the date of receipt of application, the applicant shall be entitled to interest on such duty immediately after the date of expiry of three months till the date of such refund. It was held that the entitlement of the assessee to interest, once all the requisite conditions are fulfilled, follows as a matter of law and is a mandate of the statute. It was established that the assessee had furnished all the relevant documents along with the application. The furnishing of the documents once again at the personal hearing does not change the fact that the documents were already submitted at the time of making the application.

Held that interest u/s.11BB was payable by the Revenue.