2014 (8) TMI 704 - AT - Central Excise

Denial of interest on refund claim - Interest @12% - Pre deposit made by assessee in 1998 - Appeal decided in favour of assessee - Amount deposited by assessee became refundable - Held that - Section 11BB providing for interest on delay in refund was introduced w.e.f. 26/05/95 and specific provision for interest for the period of delay in the refund of the amount of pre-deposit was introduced by inserting Section 35FF w.e.f. 10/05/08. Though during the period of dispute, there was no provision for interest for the period of delay in refund of the pre-deposit, the Apex court in the case of ITC Ltd. (2004 (12) TMI 90 - SUPREME COURT OF INDIA) has held that when the amount of pre-deposit paid in terms of the Tribunal s order becomes refundable on the final decision being in the assessee s favour, the pre-deposit must be refunded within three months and the interest @ 12% would be payable for the period of delay beyond the three months. On the basis of Apex court s judgment the Board also issued a Circular. Calcutta High Court in the case of Madura Coats Pvt. Ltd. vs. CCE, Kolkata - IV reported in 2012 (7) TMI 512 - CALCUTTA HIGH COURT has held that during the period prior to 10/05/08 interest for the period of delay beyond three months in refund of pre-deposit would be payable @ 12% per annum in accordance with the Apex court s judgment in the case of ITC Ltd. (supra) and not @ 6% per annum specified in the Notification No. 67/03-CE (NT). - Decided against Revenue.

Summary

Issues:
1. Appropriation of refundable pre-deposit against alleged demands.
2. Claim for interest on delay in refund of pre-deposit.
3. Discrepancy in interest rate determination.
4. Maintainability of appeal against memorandum ordering interest payment.

Analysis:
1. The case involved the appropriation of a refundable pre-deposit against alleged demands by the Department. The respondent had deposited an amount in compliance with Section 35F of the Central Excise Act, which became refundable when their appeals were allowed. Despite the refund being due, the Department appropriated the amount against demands. The Tribunal referred to the introduction of Section 11BB for interest on delay in refund and highlighted the Apex court's stance that interest at 12% should be paid for delays beyond three months based on the ITC Ltd. judgment. The Tribunal also noted a Circular issued by the Board following the court's decision, establishing the precedent for interest payment in such cases.

2. The issue of interest on the delay in refund of the pre-deposit was crucial. The Tribunal emphasized that during the period before the introduction of Section 35FF, interest for delays beyond three months in refunding pre-deposits should be paid at a rate of 12% per annum, as per the ITC Ltd. judgment. The Tribunal cited a case from the Hon'ble Calcutta High Court, further supporting the application of the 12% interest rate for delays in refunding pre-deposits. This analysis underscored the importance of adhering to the Apex court's decision and relevant legal precedents in determining the interest rate for such cases.

3. A discrepancy arose regarding the interest rate determination, with the Assistant Commissioner initially ordering interest payment at 6% per annum, contrary to the Commissioner (Appeals) order based on the ITC Ltd. judgment. The Tribunal found fault with the Assistant Commissioner's decision, noting that it was issued without a personal hearing and against the Commissioner (Appeals) directions. The Tribunal deemed the appeal against the Assistant Commissioner's decision maintainable, given its adverse impact on the respondent and the failure to adhere to the higher interest rate mandated by legal precedents.

4. The Tribunal ultimately dismissed the Revenue's appeal, citing the lack of merit in challenging the interest rate determination based on the established legal principles and precedents. The decision highlighted the importance of following judicial decisions and circulars issued by the Board in resolving disputes related to interest on delays in refunding pre-deposits. The judgment underscored the significance of upholding legal standards and ensuring fair treatment in matters of interest payments in such cases.