CESTAT Grants Interest on Pre-Deposit Refund Under Pre-Amended Provisions of Excise Act [Read Order]

The Allahabad Bench of Customs,Excise and Service Tax Appellate Tribunal(CESTAT) granted interest on a pre-deposit refund under the pre-amended provisions of the Central Excise Act, 1944.

Amkap Marketing Pvt. Ltd.,appellant-assessee, filed a refund claim for ₹50 lakh deposited as a pre-deposit on February 2, 2012, following the Tribunal's direction. After the Final Order dated December 27, 2018, the amount became refundable. The Original Authority approved the refund but denied interest. The Commissioner (Appeals) later dismissed the assessee's appeal against the denial of interest.

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The assessee appealed before the tribunal.

The tribunal reviewed the orders and submissions in a case involving a deposit made in 2012 under Section 35F of the Central Excise Act, 1944, before the 2014 amendment. The appellant sought a refund after winning the appeal in 2018.

Read More: Enhanced payment of 12% Interest on Pre-deposit to be payable from date of deposit till the date of Excise Refund: CESTAT

The appellate tribunal ruled that the assessee was entitled to a refund with interest under the pre-amended provisions of the Act. It clarified that deposits made before the 2014 amendment were governed by the earlier Sections 35F and 35FF. The refund had to be processed according to these provisions, with interest starting three months after the appellate order, in line with Section 11BB of the Act.

The bench referenced the Maithan Ceramics Ltd. case, confirming that interest applied from three months after the order, not from the deposit date. It found that the refund was made within three months of the order or the claim being filed, so no interest was due.

It also referred to the Ranbaxy Laboratories case, where the Supreme Court ruled that interest under Section 11BB starts three months after the refund application is filed, not from the order date. Despite the appellant citing several judgments, the tribunal held that the statutory provisions took precedence.

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The tribunal reviewed the Parle Agro Pvt. Ltd. case, which had ruled that Section 11B did not apply to revenue deposits, and concluded that an interest rate of 12% per annum was fair for revenue deposit refunds.

In the Continental Engines Pvt. Ltd. case, the tribunal ruled that the appellant was entitled to a full refund with interest, following the Supreme Court's Sandvik Asia Ltd. decision. It found an adjustment of Rs. 38,79,769 to be unjustified and ordered interest at 12%.

The appellate  tribunal also discussed the Sandvik Asia decision, which granted interest at 12% from the date of deposit, despite the lack of specific provisions in Section 11BB or Section 35FF. However, this conflicted with the Andhra Pradesh High Court's ruling.

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In Goldy Engineering Works (2023), the Delhi High Court clarified that interest on delayed refunds starts from the application date, while in Shreejikrupa Spinners Pvt. Ltd. (2016), the Gujarat High Court ruled that interim deposits were not considered "duty" and no interest was due.

A single member bench comprising Sanjiv Srivastava(Technical Member) stated that the importance of following statutory provisions and past rulings in determining interest on refunds.

To Read the full text of the Order CLICK HERE

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