Refund of Pre-Deposit Interest for Excise Duty Appeal determines from Date of Deposit, not Appeal Filing: CESTAT [Read Order]

The Ahmedabad Bench of the Customs, Excise, and Service Tax Appellate Tribunal ( CESTAT ) clarified that interest on the refund of pre-deposit for customs duty should be calculated from the date of the deposit, rather than the date an appeal is filed.

RMG Polyviny India Ltd., the company filed a claim for a refund of pre-deposit amounts paid after a show cause notice was issued. The company made deposits totaling Rs. 67,48,635 in December 2014, following the issuance of two show-cause notices.

The adjudicating authority initially upheld the demand. The company appealed to the Customs, Excise & Service Tax Appellate Tribunal (CESTAT), which ruled in their favor in 2017. The appellant sought interest on the refund amount from the date of the deposit.

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The revenue department argued that interest should be payable only from the date of the appeal filing (March 2017) per CBEC Circular No. 984/08/2014-CX, rather than the deposit date (December 2014).

On appeal, the Commissioner sanctioned a refund of Rs. 78,26,385 with Rs. 30,05,247 as interest calculated from the date of the original deposit. Aggrieved, the revenue department appealed the decision, challenging the interest calculation basis.

The revenue’s counsel (appellant) argued that the interest on the pre-deposit should begin from the date the appeal was filed in CESTAT, not from the date of the actual deposit. Only 7.5% of the duty amount should be considered as pre-deposit under Section 35F, with interest starting from the appeal date, based on CBEC Circular No. 984/08/2014-CX.

The respondent’s counsel (RMG Polyviny India Ltd) argued that deposits made before the adjudication are "deposits" rather than duty payments, which entitle them to interest from the payment date till the refund.

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The two-member bench comprising  P.K. Choudhary, Member (Judicial Member), and Sanjiv Srivastava (Technical Member) noted that funds held by the department are subject to interest regardless of when an appeal was filed. The tribunal referenced past rulings and explained that funds retained by the department for a period especially if later refunded, must include interest from the deposit date to ensure fairness.

Therefore, the tribunal dismissed the revenue’s appeal.

To Read the full text of the Order CLICK HERE

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