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

The Delhi Bench of Customs, Excise and Service Tax Appellate Tribunal (CESTAT) ruled that enhanced payment of 12% Interest on pre-deposit to be payable from date of deposit till the date of Excise Refund.

The appellant, M/s Jovex International is engaged in the manufacture of Ayurvedic Medicinal products falling under chapter 33 of the Central Excise Tariff Act, 1985 and were clearing the product without getting registered with the Department, as they were availing SSI exemption. Pursuant to search, wherein some documents were resumed. Thereafter, the Department directed the appellant to deposit an amount of Rs. 25 lakhs, which was deposited by cheque. Pursuant to show cause notice, a demand of Rs. 1,09,01,676/- was confirmed, vide order-in-original and the said amount was appropriated towards payment of duty.

The appellant filed refund claim vide application dated 16.07.2019, and also annexed the letter of HDFC Bank, confirming payment of Rs. 25 lakhs in the month of October, 2011. The Assistant Commissioner was pleased to pass the order of refund for a sum of Rs. 25 lakhs. So far the interest is concerned, he granted interest at the rate of 6%, for a truncated period of 68 days instead of allowing the interest as per Section 35EE. The appellant carried the matter before the Commissioner (Appeals) for not giving interest for the full period. The Commissioner (Appeals) was pleased to dismiss the appeal, observing that when the Department recovers an amount for non justifiable reason or illegal or without authority of law, and then in that situation the Court awards interest. Further observing that the recovery should be held unjustifiable or it should be illegal recovery, in colourable exercise of power, and thus the Court has to look into each of the cases, for award of interest. He further referred to ruling of the High Court in Tata Iron & Steel Co. Ltd., vs. UOI. He further referred to Section 11BB of the Act and observed that interest as per Section 11BB admittedly stands paid to the appellant, and hence no interference is called for.

The coram of Judicial Member, Anil Choudhary held that the applicable section for grant of interest is Section 35FF, which provides for grant of interest on the amount refundable pursuant to order of the Appellate Court. It is further provided in this section that interest should be granted from the date of deposit till the date of refund, without any discrimination. 

“I further take notice that a Division Bench of this Tribunal in Parle Agro (P) Ltd., vs. Commissioner, CGST-2021-TIOL-306-CESTAT-ALL, wherein interest on pre- deposit (made during investigation), have been enhanced from 6% to 12%, following the ruling of the Apex Court in Sandvik Asia Ltd., - 2006 (196) ELT 257 (SC). Thus, I direct the Adjudicating Authority to grant interest @ 12% per annum from the date of deposit till the date of refund. Such interest should be granted within a period of 45 days from the date of receipt or service of the copy of this order,” the CESTAT observed.

To Read the full text of the Order CLICK HERE

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