2022 (5) TMI 903 - AT - Central Excise

Interest on delayed refund - relevant time for calculation of interest - entitlement to interest from the date of expiry of three months till the date of refund of said amount from the date of communication of the order or not - HELD THAT - It is observed that the concept of three months has come under section 11BB of Central Excise Act which talks about the interest on delayed refunds. The pending amount of said provisions makes it clear that section 11B is applicable for such amount which was the amount of duty but was subsequently ordered to be refund. Commissioner (Appeals) himself has admitted the applicability of section 35FF, for the amount paid to be refunded being the amount of pre-deposit. However has invoked the pre-amended provision as was in existence prior to August 06, 2014. However the admitted fact of the present case is that the appellant become entitled for the refund pursuant to the order of this Tribunal dated 9.1.2017 i.e. the cause of action to claim the impugned refund arose in favour of the appellant after 6.8.2014 when section 35 FF got amended. A perusal of Section 35FF makes it clear that the amount of pre-deposit is to be refunded along with the interest which was not below 5 % and shall not exceed 36%. No concept of any time limit is being mentioned in the said provision. Hon ble Apex Court also has settled this issue in the case of SANDVIK ASIA LIMITED VERSUS COMMISSIONER OF INCOME-TAX AND OTHERS 2006 (1) TMI 55 - SUPREME COURT holding the assessee entiled for interest along with the refund of the amount which he was not liable to pay to the Department. The appellant was entitled for the disbursement of entire amount of Rs.60 lakh being the amount of pre-deposit. The adjustment of Rs.38,79,769/- was absolutely unreasonable and unjustified for being not pertaining to the impugned issue. Appellant is simultaneously entitled for the interest to be calculated at the rate of 12% from the date of payment of the said amount to be calculated in accordance with the table showing date of deposit - Appeal allowed.

Summary

Issues:
1. Denial of clearing scrap under DTA and imposition of demand.
2. Refund claim of pre-deposit amount with interest.

Analysis:
1. The appellant, engaged in manufacturing automotive components, faced denial to clear scrap under DTA by the department, leading to a demand of Rs. 1,04,55,307/- with interest and penalties. Despite several appeals and remands, the demand was confirmed by the authorities, prompting the appellant to approach the Tribunal for relief.

2. The appellant filed an appeal depositing Rs. 60 lakh as a pre-deposit, which was later refunded partially by the Original Adjudicating Authority. The appellant contested the denial of interest on the refunded amount before the Commissioner (Appeals) and subsequently before the Tribunal. The key argument centered around the applicability of time limits for refunding pre-deposit amounts and the entitlement to interest on such refunds.

3. The appellant's counsel argued that the refunded amount was a pre-deposit, not duty, and thus not subject to the three-month time limit for interest-free refunds. Citing various legal precedents, the counsel emphasized the entitlement to interest on the refunded pre-deposit amount from the date of payment. The Departmental Representative, however, relied on a specific order and paragraph to support the denial of interest on the refunded amount.

4. After considering the contentions of both parties, the Tribunal observed that the pre-deposit amount of Rs. 60 lakh was indeed paid by the appellant. The Commissioner (Appeals) acknowledged the appellant's entitlement to interest on the refunded amount, applying relevant provisions of the Central Excise Act. The Tribunal further highlighted the amended section 35FF, which mandates the payment of interest on delayed refunds of pre-deposits.

5. Referring to legal precedents and tribunal decisions, the Tribunal concluded that the appellant was entitled to the full refund of the pre-deposit amount, along with interest at a rate not below 5% and not exceeding 36% per annum. The Tribunal deemed the adjustment of Rs. 38,79,769/- from the refunded amount as unreasonable and unjustified, ordering the disbursement of the entire Rs. 60 lakh to the appellant with interest calculated at 12% from the date of payment.

6. In light of the above analysis, the Tribunal set aside the challenged order, allowing the appeal in favor of the appellant.