2022 (9) TMI 131 - AT - Service Tax

Interest on Refund of the pre-deposit amount - entitlement of interest from the date of deposit of the said amount or not - section 35FF of the Central Excise Act, 1944 - HELD THAT - The Heading of the amended section 35FF does not deliberately make a mention of any amount deposited under the proviso to section 35F for the simple reason that post 06.08.2014 the amount is deposited under the amended section 35F and not the proviso to the unamended section 35F. Section 35FF, post 06.08.2014, provides that where an amount deposited by the appellant under section 35F is required to be refunded consequent upon the order of the appellate authority, there shall be paid to the appellant interest at such rate, not below 5% and not exceeding 36% on such amount from the date of payment of the amount till of such amount. It is, therefore, apparent that the amended section 35FF deals with amount that is deposited post 06.08.2014 under section 35F and not to any amount that is deposited under the proviso to the unamended 35F - It is only under the proviso to the unamended section 35F that the amount is determined towards pre-deposit. On the other hand, it is the amended section 35F that requires the appellant to deposit 7.5% of the duty. In the present case, the amount was deposited by the respondent pursuant to the directions issued under the unamended provisions of the 35F. Such being the position, interest on delayed refund of amount would continue to be governed by the unamended provisions of section 35FF. It is not in dispute that if the unamended provisions of section 35FF are applicable to the facts of the present appeal, no interest would be payable to the respondent since the amount was refunded within three months from the date of communication of the order. Appeal allowed.

Summary

Issues Involved:
1. Applicability of unamended vs. amended provisions of Section 35FF for payment of interest on pre-deposit refund.
2. Entitlement to interest on the delayed refund of the pre-deposit amount.
3. Rate of interest applicable on delayed refund.

Issue-wise Detailed Analysis:

1. Applicability of unamended vs. amended provisions of Section 35FF for payment of interest on pre-deposit refund:
The core issue revolves around whether the unamended or amended provisions of Section 35FF should apply for the payment of interest on the pre-deposit amount refunded to the respondent. The Tribunal noted that the respondent had filed an appeal before the Tribunal on 05.08.2013, with the pre-deposit amount being determined by an order dated 11.05.2016. The Delhi High Court later modified this order, directing the respondent to deposit an amount equal to 7.5% of the total demand, which was deposited on 28.11.2016. The Tribunal clarified that the unamended provisions of Section 35F were applicable since the appeal and stay application were pending before 06.08.2014. The Tribunal emphasized that the amended Section 35F, which mandates a 7.5% deposit, does not apply to appeals and stay applications pending before the commencement of the Finance Act No. 2 of 2014.

2. Entitlement to interest on the delayed refund of the pre-deposit amount:
The Tribunal examined whether the respondent was entitled to interest on the delayed refund of the pre-deposit amount under the unamended Section 35FF. The Tribunal noted that under the unamended Section 35FF, interest was payable if the refund was not issued within three months from the date of communication of the order to the adjudicating authority. Since the refund was made within three months, the respondent was not entitled to any interest under the unamended Section 35FF. The Tribunal also clarified that the Delhi High Court's order did not imply that the amended provisions of Section 35FF would apply, but merely modified the pre-deposit amount to 7.5% of the total demand.

3. Rate of interest applicable on delayed refund:
The Tribunal addressed the respondent's cross-objection seeking a higher rate of interest at 12% per annum. Given the conclusion that the unamended provisions of Section 35FF applied and no interest was payable as the refund was made within the stipulated three months, the Tribunal rejected the cross-objection. The Tribunal also noted that the decisions cited by the respondent, including those from the Allahabad High Court and the Tribunal in other cases, were not applicable since the statutory provisions governed the payment of interest in this case.

Conclusion:
The Tribunal set aside the order dated 05.02.2020 passed by the Commissioner (Appeals), which had directed the payment of interest under the amended provisions of Section 35FF. The Tribunal concluded that the unamended provisions of Section 35FF applied, and since the refund was made within three months, no interest was payable. The cross-objections filed by the respondent seeking a higher rate of interest were also rejected. The appeal filed by the Department was allowed.

Order Pronounced on 02.09.2022.