Provision of S. 11BB of Excise Act not applicable for Claiming Interest on Pre-Deposit: CESTAT [Read Order]

The Allahabad Bench of the Customs, Excise and Service Tax Appellate Tribunal ( CESTAT ) has ruled that section 11BB of the Central Excise Act, which stipulates interest on delayed refunds, would not apply because there is no statutory mechanism for demanding interest on pre-deposits.

Read More: 6% Interest Allowable on Refund of Pre Deposit as per Central Tax Rate Notification : CESTAT Rules in favour of ITPO

On this Tribunal's order, Amkap Marketing Pvt. Ltd., the appellant/assessee, has submitted an application for the return of fifty lakh rupees that were pre-deposited on February 2, 2012. The appellant submitted a refund claim after the money became refundable. The cash has been refunded with no interest by the Original Authority. According to the contested order, the appellant's appeal before the Commissioner (Appeals) was denied.

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It was noted that although the original provision stated that interest would be paid at the rate specified in Section 27A after three months had passed between the date the appellate authority's order was communicated and the date the money was refunded, the substituted provision allowed interest to be paid at a notified rate that was not less than 5% nor more than 36% from the date of payment until the date the money was refunded. Moreover, the proviso to the substituted provision clarified that all amounts deposited under Section 129E before the commencement of the substituted provision on and from 2014 would be guided by pre-amended Section 129EE. 

Interest on pre-deposits made before 2014 would be calculated at the rate outlined in Section 129EE (before it was substituted), and it would be paid for a period of three (3) months from the day the appellate authority's order was communicated to the date of reimbursement.

Read More: Pre-Deposit Mandatory for Excise Appeal u/s 35 F: Calcutta HC Allows to Pay Default Pre Deposit

According to the two-member bench of Sanjiv Srivastava ( Technical Member ), the petitioner's deposit was made in accordance with a court-issued interim order and does not constitute payment of excise duty; therefore, the Central Excise Act's refund provisions would not apply. As a result, the Central Excise Act's Section 11BB, which stipulates interest on postponed refunds, would not apply. It is a well-established legal principle that the Revenue cannot be ordered to pay interest if there is no statutory provision granting the assessee the right to do so.

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The Additional Commissioner upheld the duty claim of Rs. 45,31,574 /- under Section 11A of the 1944 Act in the aforementioned ruling, and the petitioners were held accountable for paying the amount due, plus interest, in compliance with Section 11AB of the same Act. Additional directives were drafted for the seizure of Rs. 44,96,000 in cash and the imposition of Rs. 45,31,574 in money penalties. The sum of Rs. 20,00,000 that the petitioners had placed while the SCN procedures were pending was also taken away in relation to the demands that had become crystallized. 

When dismissing the appeal, the tribunal determined that even if the petitioner had claimed interest at the rate of 18 percent, the relief requested in the application could not be granted since it was not supported by any statutory provisions.

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