Interest of 6% p.a allowable on amount Deposit u/s 35F of Excise Act when not Refunded within 3 months: CESTAT [Read Order]

The Delhi Bench of the Customs, Excise & Service Tax Appellate Tribunal (CESTAT) has held that the interest of 6%per annum is allowable on an amount deposited under section 35F of the Excise Act when not refunded within 3 months.

Shri B.L. Narasimhan and Shri Shashwat Arya, Advocates for the Appellant  Shri O.P. Bisht, Authorised Representative for the Respondent 

M/s. HEG Limited, the appellant challenged the order dated 23.08.2018 passed by the Commissioner (Appeals) that modifies the order dated 14.05.2018 passed by the Assistant Commissioner on the letter submitted by the appellant on 26.03.2018 (received by the department on 19.04.2018) for a refund of an amount of Rs.3,23,09,687/- that the appellant claims was deposited by it on 10.06.2012 under section 35F of the Central Excise Act 1944.

 The appellant is engaged in the manufacture of graphite electrodes falling under Tariff Item No. 8545 11 00 of the First Schedule to the Central Excise Tariff Act, 1985. Four show cause notices for the period September 2004 to August 2010 were issued to the appellant proposing to deny CENVAT credit of Rs.1,05,72,174/- on courier services and insurance services.

Four more show cause notices for the period September 2004 to March 2011 were also issued to the appellant proposing to deny CENVAT credit of Rs.97,51,884/- on port services, cargo handling services and custom house agent services. These eight show cause notices were adjudicated by two separate orders, both dated 13.03.2012, passed by the Commissioner, wherein the entire demand totalling Rs.2,03,24,058/- (Rs.1,05,72,174/- + Rs.97,51,884/-) was confirmed with interest and equal penalty.

The appellant deposited the duty demand of Rs.2,03,24,058/- through the CENVAT credit account on 10.06.2012 and also deposited the interest amounting to Rs.1,19,85,629/- through the PLA account. The appellant filed stay applications for waiver of penalty amount and by an order dated 08.10.2012 the Tribunal disposed of the stay applications by granting a waiver of deposit of penalty amount since the duty and interest had already been deposited by the appellant.

It was contended that as a consequence of the final order dated 28.06.2017 of the Tribunal, the amount of Rs.2,03,24,058/- towards duty and Rs.1,19,85,629/- towards interest totalling Rs.3,23,09,687/- that was deposited by the appellant under section 35F of the Excise Act as a pre-condition for filing the appeal before the Tribunal became automatically refundable to the appellant but as the amount was not disbursed for a considerable period.

A Coram comprisingof Justice Dilip Gupta, President and Mr P V Subba Rao, member (technical) observed that it was the duty of the Assistant Commissioner to have made the refund of the predeposit within three months suo moto on acquiring knowledge of the order passed by the Tribunal but that was not done.

In view of the provisions of section 35FF of the Excise Act, the Tribunal held that “since the amount deposited by the appellant under section 35F of the Excise Act was not refunded to the appellant within three months from the date of communication of the order of the Tribunal, the appellant would be entitled to interest after the expiry of three months from the date of the order of the Tribunal till the date of refund of such amount at the rate of six per cent per annum.”

To Read the full text of the Order CLICK HERE

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