Setback for J.K. Cements: CESTAT Denies Interest on Cenvat Refund, Sanctioned Within Three Months [Read Order]

The Delhi Bench of Customs,Excise and Service Tax Appellate Tribunal(CESTAT)  ruled against J.K. Cements' claim for interest on a Cenvat refund, stating that since the refund was processed within three months and the reversal of Cenvat credit was considered an appropriation towards duty rather than a deposit under protest, no interest was payable under Section 11BB of the Central Excise Act,1944.

J.K. Cement Works,appellant-assessee,filed refund claims after two rounds of litigation. The Tribunal, through its order dated 04.07.2011, had partly allowed credit and remanded the matter to the Commissioner (Appeals) to quantify the disallowed amount. The Commissioner (Appeals), by order dated 04.07.2018, quantified the credit and imposed a penalty, which was paid. This order was later challenged.

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On 06.07.2022, the tribunal allowed the appeal and held that the appellant was eligible for the full amount of credit. Since the credit reversal was set aside, refund claims were filed. The adjudicating authority sanctioned the refunds but did not grant interest. The assessee approached the Commissioner (Appeals), who upheld the refunds but remained silent on the interest. Aggrieved by this, the assessee filed the present appeals before the tribunal.

The assessee’s counsel said that the tribunal’s order dated 06.07.2022 allowed all benefits under the law, so the refund should have included interest. However, the Commissioner (Appeals) denied interest, saying the tribunal did not mention it specifically.

The counsel explained that the amount was deposited during investigation and was treated as a Revenue deposit, which should earn interest when refunded. He referred to earlier Tribunal decisions in Parle Agro Pvt. Ltd. and Shahi Exports Ltd., where interest was allowed.

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He also mentioned the assessee’s earlier case decided on 02.03.2021, where the tribunal allowed 12% interest, relying on a Supreme Court ruling. He added that the Rajasthan High Court later gave interim relief, asking the department to release 50% of the interest.

He clarified that there was no issue of unjust enrichment and requested the Tribunal to allow 12% interest from the date of deposit till the date of refund.

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A single member bench of Dr.Rachna Gupta (Judicial Member) noted that the refund claim was linked to six show cause notices issued between September 2003 and April 2004, which proposed reversal of Cenvat credit availed on inputs used for manufacturing. The assessee had reversed ₹13,20,352/- after receiving the notices. While it was claimed that the reversal was under protest, the tribunal found no written evidence to support this and observed that the reversal matched the exact amount proposed in the notices.

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It held that the amount was not a deposit under protest but an appropriation towards duty. Since the refund was processed within three months of the application, the appellate tribunal ruled that no interest was payable under Section 11BB of the Central Excise Act.

It also found that the case laws relied upon by the assessee were not applicable, as those involved deposits made during investigations, unlike the present case where the reversal was done after the show cause notices.

The tribunal upheld the lower authority's order and rejected the claim for interest.

To Read the full text of the Order CLICK HERE

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