The Kolkata bench of the Customs Excise and Service Tax Appellate Tribunal (CESTAT) upheld the imposition of a 7.5% interest on the deposited demand, even though the taxpayer made a pre-deposit of the entire service tax demand.
The appellant established a Gas Cracker Project for overall development of Assam and the said project started commercial production w.e.f. 02.01.2016. After commencement of production, the appellant accumulated huge losses. These losses were incurred on account of payment of interest by the appellant for borrowings from the banks, promoters and Oil Industry Development Board for operational and working capital requirements.
Mr. M.P.Bagaria, representing the appellant submitted that the appellant is entitled to claim interest under Section 35FF of the Central Excise Act, 1944 as they have paid the said amount under protest as if it was a deposit. As they were paying interest by borrowings from the bank, he claimed that the interest is to be granted at the rate of 12% per annum. For that, he relied on the decision of this Tribunal in the case of Parle Agro Private Limited Vs. Commissioner of CGST & Excise reported in 2021-TIOL-306-CESTAT-Allahabad, to say that the amount deposited during investigation and/or pending litigation is ipso-factor pre-deposit and interest is payable on such amount to the appellant in successful in the appeal from the date of deposit till the date of refund.
Mr. Chowdhury, opposed the contention of the counsel and submitted that admittedly, w.e.f. 06.08.2014 as per amendment to Section 35F of the Central Excise Act, 1944 read with Section 83 of the Finance Act, 1994 to file an appeal, the assessee is required to make a pre-deposit of 7.5% of the amount of service tax confirmed. If any amount deposited by the appellant over and above 7.5% of demand of service tax, the same cannot be considered as to be deposited. Therefore, the provisions of Section 35FF of the Central Excise Act, 1944, are not applicable to the balance amount deposited by the appellant i.e. 92.5%.
The bench observed that the appellant made a deposit of the entire adjudicated demand of Rs. 7, 90, 08,905 on 28.12.2018 before filing the appeal. However, according to the amended provisions of Section 35F of the Central Excise Act, 1944, which apply to the Finance Act, 1994, and the Service Tax Laws for filing an appeal before the Tribunal, the appellant was required to make a pre-deposit of 7.5% of the service tax demand.
Furthermore, the assessee was required to make payment of the entire demand confirmed by the impugned order before filing an appeal before the Tribunal, even though the Tribunal had the discretionary power to waive the entire demand, a part of the demand, or require a deposit of the whole amount confirmed against the appellant to be pre-deposited.
The two member bench of the tribunal comprising Ashok Jindal ( Judicial member) and K.Anpazhakan ( Technical member) observed that appellant was entitled to claim the interest on 7.5% of the demand of service tax deposited (Rs.7,90,08,905/-) on 28.12.2018 till its realization i.e. 01.09.2022. In terms of the decision of the Tribunal in the case of Parle Agro Private Limited (supra), the appellant was entitled for interest at the rate of 12% per annum. In conclusion, CESTAT held that the appellant was entitled to interest on 7.5% of Rs.7, 90, 08,905/- from 28.12.2018 till 01.09.2022 at the rate of 12% per annum, accordingly, the appeal was disposed of.
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