Vodafone Idea's Five-Year Delay Cannot Curtail Statutory Interest On Pre-Deposit: CESTAT New Delhi

On 24 August, the New Delhi Customs, Excise and Service Tax Appellate Tribunal (CESTAT) allowed Vodafone Idea Ltd.'s appeal against the denial of interest on its service tax pre-deposit.

A Bench comprising Technical Member P.V. Subba Rao held that interest under Section 35FF of the Central Excise Act is payable from the date of deposit until the date of actual refund, regardless of the reason for the delay. He held:

“As per Section 35FF interest has to be paid from the date of payment of the amount as pre-deposit till the date of its refund. The intervening period may be short or long and may have been due to any reason whatsoever.”

Vodafone Idea had made a service tax pre-deposit on 12 November 2014. It secured a favourable judgment from the High Court on 31 October 2018 but approached the Department for refund only on 1 April 2024.

The Department refunded the pre-deposit with interest for 1,449 days, calculated up to the date of the High Court judgment. It denied interest for the period thereafter, saying Vodafone Idea had not sent the Department a letter enclosing the judgment.

Vodafone Idea claimed interest for the entire 3,498-day period from the date of the pre-deposit until the actual refund.

The Tribunal rejected the Department's stand and held that Section 35FF links the payment of interest to two dates: the date of the pre-deposit and the date of its refund. The provision does not make an exception based on the reason for the delay.

The Bench specifically considered that Vodafone Idea itself had caused the delay by taking more than five years to inform the Department about the High Court's judgment. It held:

“Nevertheless, it is still entitled to interest under section 35FF for the delay which it itself had caused. It is true that it is unfair that the appellant should profit from its own actions but equity has no place in taxation and the law must be applied regardless of the hardship or gain to the assessee.”

It added that “Section 35FF provides for interest from the date of pre-deposit till the date of refund of the pre-deposit regardless of the reasons for the intervening delay and what or who caused it.”

The Tribunal also distinguished Section 35FF from provisions governing interest on delayed refunds under the Central Excise Act, observing that the Tribunal had to apply Section 35FF according to its plain terms.

Accordingly, the CESTAT directed the Department to pay interest for the entire period from the date of pre-deposit until the actual refund, including the period of more than five years attributable to Vodafone Idea's delay.

Counsel for the Appellant: Sidharth Nanda, Advocate

Counsel for the Revenue: Rohit Issar, Authorised Representative