2007 (5) TMI 487 - AT - Central Excise

Summary

Issues involved: Granting interest on pre-deposit amount.

Details of the judgment:

1. The appellant deposited Rs. 10 lakhs under Section 35F of CEA, 1944, in compliance with a Tribunal stay order. The Tribunal later ruled in favor of the appellants, setting aside the demands. The appellants filed a refund claim for the deposited sum, which was not paid, and the amount was later being recovered under Section 11A for a confirmed demand. Various appeals and stay applications were made, with the Tribunal ultimately allowing the appeal and setting aside the impugned order in favor of the appellants. A refund claim with interest was filed for the delay in refunding the amount.

2. A show cause notice was issued questioning the interest on the refund claim. The Dy. Commissioner of Central Excise sanctioned a refund of Rs. 10 lakhs but rejected the interest amount. Part of the refunded amount was appropriated against other demands, and the balance was paid to the appellant. An appeal was made to the Commissioner (Appeals) challenging the rejection of interest on the delayed refund.

3. Section 11BB of CEA, 1944 deals with interest on delayed refunds, stating that if a duty ordered to be refunded is not refunded within three months from the date of application, interest must be paid. The Commissioner's observation that the pre-deposit under Section 35F cannot be treated as duty and thus does not carry interest was challenged. Pre-deposit was converted into duty and ultimately became free for payment after the demands were set aside. Precedents were cited where interest on delayed refund of pre-deposit amount was deemed payable under Section 11BB.

4. The impugned order rejecting interest on the delayed payment of the pre-deposit amount was set aside, and the authorities were directed to pay the interest claimed by the appellants. The appeal was allowed, and interest of Rs. 8,12,500/- was to be paid to the appellants.

*(Pronounced in Court on 7-5-2007)*