2022 (3) TMI 5 - AT - Central Excise

Entitlement of interest on delayed refund of pre-deposit - time limitation - from the date of pre-deposit till the date of refund of the principal amount or otherwise? - HELD THAT - Admittedly, the amount under dispute was deposited as a pre-deposit within the meaning of Section 35 F. Further, I find that in the preceding order of this Bench in the case of M/S J.K. CEMENT WORKS VERSUS COMMISSIONER, CENTRAL EXCISE, CENTRAL GOODS AND SERVICE TAX, UDAIPUR 2021 (3) TMI 123 - CESTAT NEW DELHI , it has been held that the interest on the refund shall be payable @ 12% per annum, as held by Hon'ble Kerala High Court in the case of SONY PICTURES NETWORKS INDIA PVT. LTD. VERSUS THE UNION OF INDIA, THE COMMISSIONER OF CUSTOMS AND CENTRAL EXCISE, THE ASSISTANT COMMISSIONER OF CUSTOMS, THIRUVANANTHAPURAM 2017 (5) TMI 864 - KERALA HIGH COURT , wherein it was held that the appellants are entitled to claim interest from the date of payment of initial amount till the date its refund @ 12% per annum. This appeal is allowed and the impugned order is set aside, so far the interest claim has been disallowed. The Adjudicating Authority is directed to grant interest from the date of deposit (31.03.2006) till the date of grant of refund @12% p.a. Such interest on refund should be granted within a period of 60 days from the date of receipt of, or service of a copy of this order - appeal allowed.

Summary

Issues:
Claim of interest on pre-deposit amount from the date of deposit till refund.

Analysis:

Issue 1: Claim of interest on pre-deposit amount

The case involved a dispute regarding the claim of interest on a pre-deposit amount made by the Appellant in compliance with a Stay Order. The Appellant had deposited a significant sum under protest, and subsequent legal proceedings led to the Tribunal setting aside the original order demanding the amount. The Appellant then sought a refund of the pre-deposit amount along with interest. However, the lower authorities initially sanctioned only the principal amount, rejecting the claim for interest through a non-speaking order. The Appellant contended that interest on the refund amount of the pre-deposit should be payable from the date of deposit till the date of its refund, citing legal precedents and judgments supporting their claim. The Appellant argued that the amount deposited was in the nature of a pre-deposit and not a duty payable, as confirmed by the Tribunal's final order in their favor. The Appellant relied on various cases and judgments, including a decision of the Hon'ble Apex Court, to support their claim for interest on the refunded amount.

Issue 2: Legal Precedents and Interpretation

The Appellant's argument was supported by legal precedents and interpretations of relevant provisions. The Tribunal referred to previous orders and judgments that established the entitlement of assessees to claim interest on the refund amount from the date of payment/deposit till the date of disbursal. Notably, the Tribunal cited the case of Sandvik Asia Limited v. Commissioner of Income Tax-I, Pune, where the Hon'ble Apex Court held that interest on delayed refund was payable to the assessee from the date of deposit till the date of its refund under Section 243 of the Income Tax Act, 1961. The Tribunal further emphasized that the provisions of Section 35FF of the Central Excise Act and Section 243 of the Income Tax Act, 1961 were considered parimateria, reinforcing the entitlement of assessees to interest on the refund amount. The Tribunal also highlighted specific cases where interest at a rate of 12% per annum was granted to assessees on refunded amounts, following judicial discipline and legal principles.

Conclusion:

Considering the settled proposition and legal precedents, the Tribunal allowed the appeal filed by the Appellant, setting aside the impugned order that denied interest on the pre-deposit amount. The Tribunal directed the Adjudicating Authority to grant interest to the Appellant from the date of deposit till the date of refund at a rate of 12% per annum. The Tribunal's decision was based on established legal principles, previous judgments, and the nature of the amount deposited as a pre-deposit rather than a duty payable. The Adjudicating Authority was instructed to calculate and pay the interest within a specified time frame, ensuring the Appellant's entitlement to interest on the refunded amount.