Amount deposited as  pre-deposit u/s 35 of the Central Excise Act subject to refund along with interest: CESTAT [Read Order]

A two member bench of CESTAT approved appellant’s  interest claim on the amount of refund sanctioned at the rate of 12% per annum from the date of the deposit of the amount till the date of refund thereof.

During a search operation against the appellant(M/s. Raghuveer Metal Industries Limited), Revenue unearthed discrepancies at the factory and related premises of the appellant. Subsequently, two show cause notices were issued against the appellant proposing the recovery of short levy duty totaling along with interest, penalties, and the confiscation of excess TMT, as well as Indian currency seized during the searches.

The tribunal’s final order  on the matter setting aside the entire demand, the order of confiscation of cash and goods, and the imposition of penalties. The appellant filed refund claims for the deposited amount and the cash seized during searches.

However, the demand of Rs.16,00,60,335/- made by the appellant, after being set aside, was remanded to Revenue for de novo adjudication.

Following this, the appellant filed refund claims for the deposited amount and the cash seized during searches.  The refund claim was sanctioned without any interest. The appellant contested this order, leading to its rejection via the impugned Order. The appeal rejection deemed the amount in question to be a pre-deposit under Section 35F of the Act, making it subject to interest payment on the refund amount after three months from the date of communication of the appellate authority's order until the date of refund.

The appellant had contended that the amount in question was in the nature of pre deposit, and argued that the time bar of Section 11B has wrongly been invoked by Commissioner (Appeals).  The appellant further contended that the amount which is treated as pre deposit is liable to be refunded along with the interest at the rate of 12%.

Revenue argued that there was no provision in law for the grant of interest except Section 11B and 35FF of the Central Excise Act. Revenue contended that no statutory provision has been mentioned by the appellant to claim the rate of interest at the rate of 12%.

Pre deposit is required to be paid by assessee under Section 35F of the Central Excise Act, 1944. The pre- deposit is repaid to the assessee if the matter is decided in the assessees

 favor

After enactment of the Finance Act, 2014, Section 35F of the Central Excise Act has been substituted with new sections to provide for mandatory pre-deposit as a percentage of the duty demanded where duty demanded is in dispute or where duty demanded and penalty levied are in dispute. Where penalty alone is in dispute, the pre deposit shall be calculated on the penalty imposed. The amended provisions apply to the appeals filed before Commissioner (Appeals) or Tribunal after 6.8. 2014.

Further, to enable refund of pre-deposit to the assesse in the event of appellate order being their favour, specific provisions in the form of revised sections 35FF and 129 EE (substituted vide Finance Act, 2014 with effect from 6.8.2014)) have been incorporated in the Central Excise Act, 1944 and Customs Act, 1962 respectively. In such a situation of order issued by the Commissioner (appeals) or Tribunal in favour of Appellant, the amount of pre-deposit is required to be refunded to the Appellant along with interest.

The two member bench comparison of Dr. Rachna Gupta (Member, Technical) and Dr. Hemambika. R Priya(Member, Technical) held that “ 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. We hold that the appellant is entitled to receive interest at the rate of 12%.”

The appellant was represented by Sukriti Das and Revenue was represented by Shri Rakesh Agarwal.

To Read the full text of the Order CLICK HERE

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