In a ruling in favour of India Trade Promotion Organization (ITPO), the New Delhi bench of the Customs, Excise & Service Tax Appellate Tribunal ( CESTAT ) held that 6% interest is fixed on refund of pre deposit under Central Excise Act as per Central Tax Rate Notification.
The appellant challenged the order passed by commissioner (Appeals) which the appellant is denied eligible for interest on the amount refunded. A Show Cause Notice was served upon the appeal proposing demand of service tax on the amount received as grant, from Ministry of Information and Broadcasting, to the appellant for providing “Business Exhibition Services” during the period 2006-07 to 2010– 11. The said proposal was confirmed vide adjudication Order No. 01/ 2014–15 dated 22.01. 2015 and the demand for an amount of ₹ 4,10,40,683/- along with the applicable interest and the penalty under section 77 and 78 of the finance act,1994 was confirmed against the appearance.
An appeal against the said order was filed before this Tribunal which was decided vide final order number 53031/ 2018 –CU dated 13.09. 2018 in favor of the assessee appellant. The department filed an appeal against the said order before Supreme Court. Supreme Court has refused to interfere in the matter and dismissed the civil appeal of the department. Pursuant to the said order, the appellant filed a refund claim of Rs.8 ,81,20,922/-on 10.01.2019 submitting that the said amount was paid under protest.
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Siri P. K. Sahu, Advocate for the appellant and Sri S. K. Meena, Authorized Representative for the department.
Counsel for appellant submitted that the commissioner (Appeals) was of the opinion that refund could not be granted as long as the revenue has filed an appeal and the matter was not decided by Supreme Court. Even after Supreme Court has decided not to interfere with the order of the tribunal, the adjudicating authorities below are of the view that refund could be granted till the a copy of Hon’ble Supreme Court order is received.
While rebutting these submissions Authorized Representative for department has mentioned that the appellant had deposited the entire demand after the demand was confirmed by the commissioner and then filed the present appeal before this Tribunal. Both the authorities have acknowledged the fact that the amount paid by the appellant is the amount of pre-deposit. Hence, the grant of interest would be governed by section 35FF of Central Excise Act,1944.
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The order of Commissioner (Appeals) has been challenged on the ground that the appellants were entitled to be paid interest at the rate of 12% per annum on the total amount of the refund from the date of its deposit till the date of its actual payment. To adjudicate the same foremost we need to look into the relevant provisions which entitle assessee for the interest to be paid on the amount deposited by them which specifically can be called as revenue deposits.
In the CBEC circular dated 10.03.2017 it was instructed that the adjudicating authorities not to withhold refund on the ground that an appeal has been filed unless stay has been granted by the appellate authority Central Board of Excise & Customs (CBEC) has stated that, where the appeal is decided in favor of the assessee, the amount of tax deposited is not to be governed by Section 11B of the Central Excise Act, 1944.
It has instructed that refund should be paid to the appellant within 15 days of the receipt of his letter, seeking refund, whether or not an appeal against the order is contemplated by the department. CBEC has also clearly instructed that interest should be paid from the date of payment of tax to the date of refund.
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Apparently and admittedly the appellant became entitled for refund of the amount pursuant to the order of this Tribunal setting aside the duty demand against the appellant. The refund was sanctioned in lieu thereof.
A two member bench of Dr. Rachna Gupta, Member (Judicial) and Hemambika R. Priya, Member (Technical) observed that the amount in question was not deposited under Section 35F, however is akin to predeposit. It is clear that Section 11B and 11BB of Central Excise Act will not be applicable to the amount in question, the denial of the interest on the appellant’s amount is held to be unjustified.
Section 35FF itself prescribes the rate of interest in the range of 5% to 36% when these provisions is read in the light of the above provisions and the decisions with respect to the rate of interest. The bench observed that the Central Government vide Notification No. 12/2023Central Tax (Rate) has fixed the rate of interest @ 6%.
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While allowing the appeal, the bench held that the appellant to be entitled for getting interest on the amount of refund from the date of payment till the date of its disbursement, however at the rate of 6%.
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