Acceptance of Excess Service Tax Pre-Deposit: CESTAT Directs Revenue to Refund Accrued Interest to Yamaha [Read Order]

The Allahabad Bench of the Customs, Excise & Service Tax Appellate Tribunal ( CESTAT ) in a recent matter upheld the right of an Appellant to receive accrued Interest on Pre-Deposit amount deposited with the Appellate Authority to permit filing of Appeal, notwithstanding the Appellate Authority’s breach of accepting a pre-deposit amount higher than the statutorily permissible limit under Section 35F of the Central Excise Act, 1944.

The present Excise Appeal was filed by India Yamaha Motor Pvt. Ltd, against Order-in-Appeal passed by the Commissioner (Appeals) CGST, Noida on 09.10.2020.

Commissioner (Appeals) CGST, Noida affirmed refund of the pre-deposit amount, but denied grant of accrued interest on the pre-deposit to the Appellant-Assessee.

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The Adjudicating Authorities were required to resolve the present matter in line with the provisions of the Central Excise Act, 1944 instead of the currently operational Goods and Service Tax ( GST ) provisions, as the pre-deposit amount had been posted by the Appellant on 21.06.2017, prior to the enactment of the GST Laws enacted 2017.

In light of the inability to retrospectively apply the GST Laws, the Central Excise Act, 1944 has been applied in the present case.

Commissioner (Appeals), CGST raised multiple contentions against the Appellant’s claim over the accrued interest. The primary objection of the  Commissioner was that the pre-deposit was paid by way of debit from ITC account and not in cash; further, the amount paid exceeded the statutory limit of Rs. 10 Crore as stipulated by Section 35F of the Central Excise Act, 1944.

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Additionally, the Commissioner (Appeals) attempted to absolve itself of any liabilities in affirming the payability of the accrued interest by maintaining that the payability is a matter to be adjudged by the Original Appellate Authority and advised the Appellant to approach the same.

The counsels for the Appellant, Atul Gupta and Ushmeet Kaur Monga relied on the case of L.G. Electronics India Pvt. Ltd. v. Commissioner, Central Excise (2019) to contend that, ‘in the event that interest is payable by operation of law, it has to be disbursed without question’.

The Ahmedabad Bench of CESTAT presided upon solely by P.K. Choudhary, Judicial Member observed that the refund of accrued interest along with the pre-deposit amount is “statutory and axiomatic” as per the mandates of Sections 35FF and Section 35F of the Central Excise Act, 1944.

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CESTAT referred to its own decision in Cadila Pharmaceuticals Ltd. vs. Commissioner of Service Tax (2018)to refute the Revenue’s allegations, stating that the Sections do not differentiate between deposits made in cash or by debit in a CENVAT account.

Concludingly, the Judicial Member pronounced that accepting a pre-deposit in excess of the statutory limit of Ten Crore Rupees is a violation committed by the Adjudicating Authority; such acceptance does not absolve them of the liability to pay interest on the pre-deposit subsequent to disposal of the Appeal under Section 35FF of the Central Excise Act, 1944.

To Read the full text of the Order CLICK HERE

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