The New Delhi Principal Bench of Customs, Excise & Service Tax Appellate Tribunal ( CESTAT ) has held that the assessee is entitled for an interest of 12% on pre deposit amount under Section 35F of the Central Excise Act.
The appellants, M/s Elegant Developers, are engaged in Real Estate Agent Services and are registered under Service Tax. Show cause was issued to the appellants by DGCEI, New Delhi proposing a demand along with interest and the penalty. The said proposal was confirmed by original Adjudicating Authority. However, this Tribunal has set aside the aforesaid Order-in-Original. Pursuant thereto that the appellant filed a refund claim for amount of pre-deposit of Rs.22,05,981/-. The said amount along with interest of Rs.5,53,006/- was sanctioned in favour of the appellant. The Department had gone in an appeal against the said order and Commissioner (Appeals) has allowed the Department’s appeal setting aside the Order in-Original to the extent of sanctioning the amount of Rs.5,53,006/- as interest. Being aggrieved thereof, the appeal filed before CESTAT.
The impugned amount was deposited in terms of Section 35F of Central Excise Act, 1944, the provision which demands deposit of certain percentage of duty demanded or penalty imposed before filing the appeal. This amount of deposit prior to filing of appeal either before Commissioner (Appeals) (7.5%) or before this Tribunal (additional 2.5%) has to be refunded consequent upon the order of respective Appellate Authority in terms of Section 35FF of Central Excise Act. The impugned refund claim was filed after this Tribunal disposed off the appellant’s appeal against the Order in-Original. Section 35FF, further, entitles appellant for the interest along with the refund of the amount of pre-deposit. This Section, however, has undergone an amendment vide Finance Act of 2014. The controversy herein is as to whether Section 35FF pre-amendment will be applicable to the present case or Section 35FF post-amendment.
It was submitted on behalf of the appellant that Commissioner (Appeals) has rejected the entitlement of appellant qua the interest on the sanctioned refund relying upon the un-amended Section 35FF of Central Excise Act, 1944. It was submitted that the amendment in Section 35FF of Central Excise Act is only clarifying in nature hence it was to be given a retrospective effect. The reliance of Commissioner (Appeals), still, on erstwhile Section 35FF is therefore mentioned to be absolutely wrong. More than that the pre-deposit made by the appellant is not the payment of duty hence it was an amount being unauthorisedly held by the Department from the date of its payment.
CESTAT observed that the appellant filed an appeal before this Tribunal against Order-in-Original dated 30th September, 2013 apparently the amount as required under Section 35F to be deposited while filing such appeal was deposited by the appellant on dated 06.10.2015. This particular perusal makes it abundantly clear that the amount of pre-deposit under Section 35F of Central Excise Act, 1944 was made after the amendment introduced vide Finance Act, 2014. Hence, the case of the appellant goes out of the scope of proviso to the amended provision and it shall be amended Section 35FF and not the erstwhile Section 35FF which shall be applicable to the deposit in question. Accordingly, the original Adjudicating Authority had rightly sanctioned the refund along with the interest. The Commissioner (Appeals) is rather held to have committed error while relying upon the erstwhile Section 35FF of Central Excise Act, 1944.
It was further observed by the CESTAT that original Adjudicating Authority has awarded interest at the rate of five per cent. The said rate is the lowest rate in the amended Section 35FF. The amount in question is not an amount of duty but was an amount paid by way of deposit under Section 35F for availing the remedy of an appeal. The appeal has been allowed. Such an amount is bound to be refunded along with the appropriate consequential relief as that of interest.
The single bench presided by Rachna Gupta, Member (Judicial) has held that “I am of the opinion that the reasonable rate of interest in the given facts and circumstances is the rate at twelve percent. Hence, the request of the appellant is accepted with respect to rate of interest also. Consequent to the above discussion, the order under challenge/Order-in-Appeal is hereby set aside holding appellant to be entitled for sanction of refund of pre-deposit amount along with interest at the rate of twelve per cent thereof. The appeal accordingly stands allowed”.
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