2022 (12) TMI 719 - AT - Central Excise

Interest on the delayed refund of deposit - whether the appellant had deposited Rs.3,23,09,687/- under section 35F of the Excise Act because if it was such a deposit then the appellant would be entitled to interest under the provisions of section 35 FF of the Excise Act? - HELD THAT - Section 11B of the Excise Act deals with claim for refund of duty and interest, if any, paid on such duty. Sub-section (1) of section 11B of the Excise Act provides that any person claiming refund of any duty of excise and interest, if any, paid on such duty may make an application for refund of such duty and interest to the Assistant Commissioner of Central Excise before the expiry of one year from the relevant date. It is, therefore, clear that section 11B of the Excise Act would only apply for claim of refund of duty and interest, if any. It would have no application in a case where the applicant seeks refund of the pre-deposit amount. The Commissioner (Appeals) rejected the claim by treating the refund to have been claimed by the appellant under section 11B of the Excise Act and consequently making applicable the provisions of section 11BB of the Excise Act that deals with interest on delayed refunds. The claim of the appellant was under section 35F of the Excise Act and not under section 11B of the Excise Act. Mere mention of a wrong provision in the letter submitted by the appellant will not work to the prejudice of the appellant if in law the refund claimed by the appellant can be traced to section 35F of the Excise Act. Interest was, therefore, required to be paid to the appellant under the provisions of section 35FF of the Excise Act and not under section 11BB of the Excise Act. The Supreme Court in UNION OF INDIA VERSUS TATA SSL LTD. 2007 (10) TMI 16 - SC ORDER also relied upon its earlier judgment in COMMISSIONER OF CENTRAL EXCISE, HYDERABAD VERSUS ITC. LTD. 2004 (12) TMI 90 - SUPREME COURT and the Circular dated 08 December, 2004 to hold that pre-deposit made as a condition for hearing the Appeal has to be refunded to the assessee with interest when the assessee becomes successful. In view of the provisions of section 35FF of the Excise Act it has to be held that since the amount deposited by the appellant under section 35F of the Excise Act was not refunded to the appellant within three months from the date of communication of the order of the Tribunal, the appellant would be entitled to interest after the expiry of three months from the date of the order of the Tribunal till the date of refund of such amount at the rate of six percent per annum - Appeal allowed in part.

Summary

Issues Involved:
1. Entitlement to interest on delayed refund of pre-deposit under Section 35FF of the Central Excise Act, 1944.
2. Nature of the deposit made by the appellant - whether it was a pre-deposit under Section 35F or a duty deposit under Section 11B of the Excise Act.
3. Applicability of the provisions of Section 11B and 11BB of the Excise Act to the refund claim.
4. Compliance with Board Circulars regarding the refund of pre-deposit.

Issue-wise Detailed Analysis:

1. Entitlement to Interest on Delayed Refund of Pre-deposit under Section 35FF of the Excise Act:
The appellant claimed interest on the delayed refund of Rs. 3,23,09,687/- deposited under Section 35F of the Excise Act. The Tribunal held that the appellant is entitled to interest under Section 35FF of the Excise Act if the refund is delayed beyond three months from the date of the Tribunal's order. The Tribunal noted that the Assistant Commissioner did not address the issue of interest, and the Commissioner (Appeals) wrongly applied Section 11BB instead of Section 35FF.

2. Nature of the Deposit Made by the Appellant:
The Tribunal examined whether the deposit made by the appellant was under Section 35F or as a duty deposit under Section 11B. It was concluded that the deposit was a pre-deposit under Section 35F, as it was made to comply with the conditions for filing an appeal. The Tribunal emphasized that the amount deposited as a pre-deposit is not a payment of duty but a condition for pursuing an appeal.

3. Applicability of Sections 11B and 11BB of the Excise Act:
The Tribunal clarified that Section 11B, which deals with the refund of duty, does not apply to pre-deposits made under Section 35F. Consequently, the provisions of Section 11BB, which govern interest on delayed refunds of duty, are also inapplicable. The Tribunal cited several judicial precedents, including the Bombay High Court's decision in Suvidhe Ltd. and the Supreme Court's rulings, to support this interpretation.

4. Compliance with Board Circulars:
The Tribunal referred to the Central Board of Excise and Customs Circulars dated January 2, 2002, and December 8, 2004, which mandate that pre-deposits should be refunded within three months of the appellate order, and any delay would attract interest liability. The Tribunal criticized the Commissioner (Appeals) for ignoring these Circulars and the established judicial precedents, leading to an erroneous rejection of the appellant's claim for interest.

Conclusion:
The Tribunal concluded that the appellant is entitled to interest on the delayed refund of the pre-deposit amount under Section 35FF of the Excise Act. The order of the Commissioner (Appeals) was modified to direct the payment of interest at the rate of six percent per annum from three months after the Tribunal's order date until the refund date. The appeal was allowed in favor of the appellant.