The Allahabad Bench of Customs, Excise & Service Tax Appellate Tribunal ( CESTAT ), has allowed the appeal granting interest on the refundable amount of Rs. 50,00,000 to the appellant from the date of deposit till the date of refund at a rate of 12% per annum.
The appeal arose from Order-in-Appeal passed by Commissioner ( Appeals ) CGST & Central Excise, Allahabad. The appellant, M/s Kurele Fragrances Pvt. Ltd., challenged the order regarding the grant of interest on the amount deposited during an investigation from the date of deposit until the date of refund allowance. The business premises of the appellant were searched on 30.05.2006, following which Rs. 50,00,000 was deposited by the appellant on 03.06.2006 at the behest of the department during the investigation.
A show cause notice was issued to the appellant on 13.06.2008, demanding a duty of Rs. 11,06,661 along with interest and an equivalent penalty. This was adjudicated by the learned Commissioner on 31.03.2010, confirming the duty demand and penalty and appropriating the Rs. 50,00,000 deposit.
The appellant filed an appeal before the CESTAT, Regional Bench, Allahabad, on 06.07.2010, which was decided in their favor on 24.07.2017, setting aside the impugned order and allowing consequential relief.
The subsequent appeal of the department against the order of the tribunal was dismissed by the Allahabad High Court on 05.02.2019. The appellant then filed a refund application on 12.07.2019 for the Rs. 50,00,000 deposit, claiming interest from the date of deposit till the refund sanction. Although the Assistant Commissioner sanctioned the refund on 02.01.2020, no order was passed regarding the interest. The appellant filed an appeal before the learned Commissioner (Appeals) on 01.12.2020, seeking interest, which led to the remand of the matter back to the Assistant Commissioner on 12.07.2021.
The bench of P.K Choudhary (Judicial Member) observed that the issue was squarely covered by the precedent ruling of the Division Bench in Parle Agro Pvt. Ltd. vs. Commissioner, CGST, Noida, confirmed by the Punjab & Haryana High Court in Riba Textile Ltd. vs. CCE & ST. The Division Bench held that interest on refund of the amount deposited during investigation or pendency of appeal is allowable under Section 35EE of the Act and must be paid from the date of deposit till the date of refund.
Pragya Pandey and Pankaj Kumar, counsels for the appellant, argued that the ruling in Parle Agro Pvt. Ltd., supported by the Supreme Court ruling in Sandvik Asia Ltd. vs. Commissioner of Income Tax-I, Pune, entitled the appellant to interest on the refund.
The Tribunal allowed the appeal and held that the appellant is entitled to interest on the refundable amount of Rs. 50,00,000 from the date of deposit (03.06.2006) till the date of refund (02.01.2020), at 12% per annum.
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