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2022 (9) TMI 270 - AT - Service TaxInterpretation of statute - Interest on refund - whether the interest on any amount pre-deposited prior to 6.8.2014 continues to be covered by provisions of un-amended Section 35FF of Central Excise Act, 1944 or will it be governed by amended Section 35FF ibid entitling interest from the date of pre-deposit? HELD THAT - A perusal of the provisions of Section 35FF would make it clear that earlier i.e. upto 6.8.2014, the interest was liable to be paid only in the case of delay beyond three months in granting the refund from the date of communication of order passed by the Commissioner (Appeals) or the Tribunal, whereas post 6.8.2014, this has been changed and an interest has been made payable at a rate not below 5% and not exceeding 36% p.a. as is for the time being fixed by the Central Government by notification in the official gazette on such amount from the date of payment of amount till the date of refund of such amount. Proviso has also been added to it that any amount deposited under this section prior to the amendment, shall continue to be covered by the provisions of S.35FF as it stood before the amendment. Admittedly, in the instant matter the amount was pre-deposited by the appellant on 25.6.2014 under Section 35F as per the direction of the Hon ble High Court and during that period un-amended section 35FF which dealt with interest on delayed refund of amount deposited u/s.35F mandates the payment of interest only if there was a delay of refund beyond three months from the date of the order of the Tribunal. Interest from the date of payment of the amount till the date of refund of such amount has been made applicable only for post-6.8.2014 deposits when section 35FF was amended. Admittedly in the instant matter the pre-deposit was made on 25.6.2014, which is prior to 6.8.2014 when section 35FF required an interest as specified in Section 11BB to be paid for any amount of pre-deposit which has been refunded after a period of three months from the date of communication of order of appellate authority till the date of refund of such amount - in the instant matter the interest on refund has to be dealt with in accordance with the erstwhile section 35FF which clearly mandates the payment of interest only if there was a delay beyond three months. The statutory period prescribed therein is 3 months from the date of communication of the order of the Appellate Authority. The statute uses the word communication of the order of appellate authority and that cannot be construed as receipt of the copy of the order . When any order is pronounced in Tribunal, Department is represented through Departmental Representative/Authorised Representative and therefore communication of order to them deemed to have been communicated to the concerned authority which has to sanction refund. After the expiry of three months from the date of the final order dated 19.02.2020, the appellant is entitled for the interest on delayed refund till the date of refund of the pre-deposit amount and to that extent only the impugned order is modified and the matter is remanded to the Adjudicating Authority for calculating the amount of interest on the above terms and to pay the same to the appellant within a period of two months from the date of this order - Appeal allowed in part.
Issues Involved:
1. Entitlement to interest on pre-deposit amount. 2. Applicability of un-amended vs. amended Section 35FF of the Central Excise Act, 1944. Issue-wise Detailed Analysis: 1. Entitlement to Interest on Pre-deposit Amount The primary issue revolves around whether the appellant is entitled to interest on the pre-deposit amount from the date of pre-deposit or from the date of filing the refund application. The appellant argued that they should receive interest from the date of pre-deposit (25.06.2014) until the refund was made (November 2020). They cited the Supreme Court decision in Sandvik Asia Ltd. vs. CIT and the Tribunal's decision in Riba Textile Ltd. vs. Commr. CE&ST, Panchkula to support their claim. The department, however, contended that interest should only be applicable if there was a delay beyond three months from the date of communication of the appellate authority's order, as per the provisions of Section 35FF prior to its amendment. 2. Applicability of Un-amended vs. Amended Section 35FF The core legal question was whether the interest on any amount pre-deposited before 06.08.2014 should be governed by the un-amended Section 35FF or the amended Section 35FF of the Central Excise Act, 1944. The Tribunal noted that the un-amended Section 35FF mandated interest only if there was a delay beyond three months from the date of communication of the appellate authority's order. The amended Section 35FF, effective from 06.08.2014, provided for interest from the date of payment of the amount till the date of refund. The Tribunal observed that the proviso to the amended Section 35FF clearly states that any amount deposited before the commencement of the Finance (No.2) Act, 2014, shall continue to be governed by the provisions of Section 35FF as it stood before the amendment. Therefore, since the pre-deposit in this case was made on 25.06.2014, the un-amended Section 35FF applied. Judgment: The Tribunal concluded that the appellant is entitled to interest on the delayed refund only if there was a delay beyond three months from the date of communication of the order of the appellate authority (19.02.2020). The Tribunal found that the refund was sanctioned on 28.10.2020, following the appellant's letter dated 22.07.2020. It was held that the department cannot benefit from its own lethargy, and the statutory period of three months should be calculated from the date of the Tribunal's final order. The Tribunal remanded the matter to the Adjudicating Authority to calculate the interest on the delayed refund from the expiry of three months from the date of the final order (19.02.2020) until the date of refund. The appeal was partly allowed, and the Adjudicating Authority was directed to pay the calculated interest within two months from the date of the order. Conclusion: The Tribunal's decision clarified that for pre-deposits made before 06.08.2014, the un-amended Section 35FF applies, which mandates interest only for delays beyond three months from the date of communication of the appellate authority's order. The appellant was entitled to interest for the period of delay beyond three months from the Tribunal's final order until the refund date.
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