Interest Not Payable from 2008 Deposit: CESTAT Holds Sugar Manufacturer Not Entitled to Interest on Investigative Deposit [Read Order]
CESTAT allows the Revenue’s appeal, ruling that DSM Sugar is not entitled to interest from the 2008 investigative deposit and may receive interest only from the permissible refund period.
CESTAT denies interest from 2008 deposit, allowing Revenue’s appeal
The Allahabad Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has allowed the Revenue’s appeal, setting aside the Commissioner (Appeals)’s order that had granted interest from the 2008 date of deposit on the refund of ₹78,01,415 reversed during investigation by DSM Sugar.
The dispute began when the respondent, DSM Sugar engaged in the manufacture of sugar and molasses, reversed ₹78,01,415 from its c credit account in June 2008 “under protest,” following two Show Cause Notices issued in 2008 for alleged wrongful availment of credit on iron, steel and welding electrodes.
The adjudicating authority later confirmed a demand of ₹4,29,33,132 with interest and penalty through the Order-in-Original dated 31.03.2017.
On appeal, the Tribunal set aside the entire demand and allowed DSM Sugar’s appeal.
Following this, the assessee filed a refund claim on 02.06.2019 for the amount reversed during investigation. The refund was sanctioned along with partial interest, but interest was computed only on 7.5% of the demand and only from the date of filing the appeal.
Aggrieved, the assessee approached the Commissioner (Appeals) seeking interest on the entire deposit from the date of reversal in 2008 till the date of refund. The Commissioner (Appeals) accepted the plea, observing that the amount, though not payable, had been “retained by the department for such a long period without authority of law.”
The Revenue challenged this before the Tribunal.
The Bench comprising Sanjiv Srivastava (Technical Member) and S.K. Mohanty (Judicial Member) examined the nature of the 2008 reversal and held that it was not a statutory pre-deposit, but a payment made during investigation towards a “probable duty liability.” The Tribunal further noted that interest on refunds of such deposits is governed strictly by Sections 35FF and 11B, and no interest can be granted for any period prior to the date prescribed in these provisions.
Accordingly, the Tribunal allowed the Revenue’s appeal, holding that DSM Sugar was not entitled to interest from the date of the 2008 deposit, and that interest was payable only to the extent permitted under the statutory scheme.
The assessee was represented by A.K. Choudhary, while Aalok Arora appeared for the Revenue.
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