2022 (1) TMI 314 - AT - Central Excise

Entitlement to Interest - Reversal of CENVAT Credit under protest - case of appellant is that amount reversed has to be treated as deposit and the appellant is entitled for interest from the date of debit till the date of its realisation under Section 35FF of Central Excise Act - HELD THAT - There is mistake of law in the impugned order-in-appeal dated 28.08.2020, as the applicable section for interest is Section 35FF and not Section 11BB. Accordingly, taking noticed that Division Bench of this Tribunal in M/S. PARLE AGRO PVT. LTD. VERSUS COMMISSIONER, CENTRAL GOODS SERVICE TAX, NOIDA (VICE-VERSA) 2021 (5) TMI 870 - CESTAT ALLAHABAD , wherein interest on pre-deposit (made during investigation) have been enhanced from 6% to 12%, following the ruling of the Apex Court in SANDVIK ASIA LIMITED VERSUS COMMISSIONER OF INCOME-TAX AND OTHERS 2006 (1) TMI 55 - SUPREME COURT . Thus, the impugned order is set aside so far interest issue is concerned. The Adjudicating Authority is directed to grant interest @ 12% per annum from the date of deposit till the date of refund. Such interest should be granted within a period of two months from the date of receipt or service of the copy of this order - appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Cenvat credit reversal under protest and subsequent demand confirmation.
2. Appeal against the refund transfer to Consumer Welfare Fund.
3. Appeal for interest on refund from the date of deposit till realization.
4. Applicability of Section 35FF for interest on the reversed cenvat credit.
5. Legal precedent references for supporting the appeal.

Analysis:
1. The appellant, engaged in the manufacture of V. P. Sugar & Molasses, faced objections from the Department regarding the cenvat credit amounting to ?77,95,735/- reversed under protest. This led to a show cause notice and subsequent demand confirmation by the Commissioner. The Tribunal allowed the appeal against this demand on 21.10.2019.

2. Post the Tribunal's decision, the appellant filed refund claims which were initially transferred to the Consumer Welfare Fund by the Adjudicating Authority. The Commissioner (Appeals) later allowed the refund claims, stating that undue enrichment did not apply, and the appellant was entitled to a refund. However, the appellant was not granted interest post three months from the date of filing the refund claims.

3. The appellant challenged the lack of interest on the refund from the date of deposit till realization before the Tribunal. The Department argued against this claim. The Tribunal noted that the reversed cenvat credit amount should be treated as a deposit, entitling the appellant to interest from the date of debit till realization under Section 35FF.

4. The appellant's counsel cited various legal precedents supporting the entitlement to interest on delayed refunds, emphasizing the delay in the grant of the refund as a crucial factor. The Tribunal, after considering the arguments, found a mistake of law in the impugned order-in-appeal dated 28.08.2020, clarifying that interest should be granted under Section 35FF, not Section 11BB.

5. Relying on the Division Bench's decision in Parle Agro (P) Ltd. vs. Commissioner, CGST, the Tribunal set aside the order and directed the Adjudicating Authority to grant interest at 12% per annum from the date of deposit till the date of refund. The Tribunal allowed both appeals, emphasizing the need for prompt payment of the directed interest within two months of the order's receipt or service.