Relief for Yamaha: CESTAT Orders Full Interest on Erroneous NCCD Deposit Refund [Read Order]

The Allahabad Bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) granted full relief to India Yamaha Motor Private Limited by ordering interest on the entire amount of refund arising from an erroneous deposit of National Calamity Contingent Duty (NCCD), holding that the government cannot unjustly retain taxpayer funds.

India Yamaha Motor Private Limited, the appellant, is engaged in the manufacture of motorcycles and scooters. During the period from March 2016 to June 2017, the appellant inadvertently used Cenvat credit to discharge NCCD, which was later discovered to be impermissible under the amended proviso to Rule 3(4) of the Cenvat Credit Rules, 2004. Upon realizing the error, the appellant paid the NCCD again in cash on 30.07.2018 and subsequently filed a refund claim for the erroneously utilized Cenvat credit.

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The department initially rejected the refund claim on the grounds of limitation under Section 11B of the Central Excise Act, 1944. The Assistant Commissioner held that the refund claim was time-barred. On appeal, the Commissioner (Appeals) observed that the amount paid via Cenvat credit did not constitute duty but was a mere deposit. The appellate authority directed the refund be processed accordingly.

Following the order, the adjudicating authority refunded the principal amount of Rs. 38,72,24,971 in cash but granted interest only on 7.5% of the amount, treating it as a pre-deposit under Section 35F. Both the appellant and the department challenged the order: the appellant sought interest on the full amount, while the department contended that no interest at all was admissible.

The appellant’s counsel argued that the amount retained by the government was an unauthorized deposit, not a statutory pre-deposit or duty, so the interest was due on the full amount from the date of deposit to the date of refund. The appellant relied on judgments such as R.H.L. Profiles Ltd. v. CCE, Ebiz.Com Pvt. Ltd. v. CCE, and Parle Agro Pvt. Ltd. v. CGST, Noida, all of which upheld the principle of restitution and compensation for wrongful retention of funds.

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The department’s counsel argued that interest could only be granted under statutory provisions, such as Section 35FF, and that the refund should not carry interest beyond what was pre-deposited under the appeal provisions.

The single-member bench of Judicial Member P.K. Choudhary rejected the department’s argument and held that the amount in question was never payable in the first place. The tribunal observed that the doctrine of restitution applied squarely, as the government had retained the amount without lawful authority for an extended period. The tribunal explained that the denial of interest on the full refund amount was contrary to established legal principles, including the rulings in Pratibha Processors v. Union of India and Abhishek Fashions Pvt. Ltd. v. Union of India.

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The tribunal ruled that the appellant was entitled to interest on the entire sum refunded, from the date of deposit until the date of disbursement. The impugned order was set aside to the extent it denied such interest, and the appeal was allowed with consequential relief.

To Read the full text of the Order CLICK HERE

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