2024 (3) TMI 1230 - AT - Service Tax

Claim of Interest on Refund of pre-deposit (amount as was deposited in terms of Section 35F of the Finance Act) - rejection on the ground that the amount of interest on the refund claim as was already sanctioned to the appellant - HELD THAT - It is held that Commissioner (Appeals) has wrongly relied upon the pre amended Section 35FF for denying the entitlement of interest to the appellant. The appellant is held entitled for the same. The decision of Hon ble Apex Court in the case of Commissioner of Customs (Import), Raigad vs M/s. Finacord Chemicals (P) Ltd. 2015 (5) TMI 371 - SUPREME COURT while discussing the liability of the department to pay the interest has referred to Departments' own circular dated 02.1.2002 wherein the Board clarified that the matters of refund other than the amount of duty would not be covered under the provisions of Section 11B of Customs Act or Section 35FF of Central Excise Act. It was held by the Hon'ble Apex Court that in such cases of refund even the concept of unjust enrichment is not applicable. Rate of interest - HELD THAT - No doubt the department has relied upon a notification of 2014 and as per the Section 35FF also, the rate of interest has to be more than 5% but less than 36%, however, subject to a re-notification. The above decision of Hon ble Apex Court in M/s. Finacord Chemicals (P) Ltd. 2015 (5) TMI 371 - SUPREME COURT which is subsequent to the said notification. Applying the said matrix, the appellant entitled for interest at the rate of 12%. The decision of Hon ble High Court is found not applicable to the given set of circumstances. The provision involved in the said decision is the Section 129 EE of the Customs Act - the appellant is held entitled for interest from the date of deposit to the date of payment at the rate of 12%. Appeal allowed.

Summary

Issues Involved:
1. Entitlement to interest on the amount of pre-deposit refunded.
2. Applicability of amended Section 35FF of the Finance Act.
3. Rate of interest applicable on the refunded amount.

Summary:

1. Entitlement to Interest on Pre-deposit:
The appellant, M/s. Kumawat Contractors, contested the denial of interest on the refunded pre-deposit amount of Rs. 8,00,000/-. The Tribunal observed that the amount in question was a mandatory pre-deposit made while filing an appeal before the Commissioner (Appeals) under Section 35F of the Finance Act. The refund of this amount was sanctioned without interest, which was subsequently challenged.

2. Applicability of Amended Section 35FF:
The Tribunal examined the applicability of Section 35FF, both pre and post-amendment. It was noted that the refund application was filed in 2020, making the amended Section 35FF relevant. The Tribunal referred to the decision in M/s. Riba Textile Ltd., which emphasized that the date of the refund application is crucial for determining the applicable provisions. The Tribunal held that the Commissioner (Appeals) wrongly relied on the pre-amended Section 35FF and that the appellant was entitled to interest under the amended provisions.

3. Rate of Interest:
The Tribunal addressed the rate of interest applicable on the refunded amount. The appellant cited various decisions advocating for a 12% interest rate. The Tribunal referred to the Supreme Court's decision in Commissioner of Customs (Import), Raigad vs. M/s. Finacord Chemicals (P) Ltd., which supported the entitlement to interest on refunds not covered under Section 11B of the Customs Act. The Tribunal concluded that the appellant was entitled to interest at the rate of 12% from the date of deposit till the date of refund, dismissing the department's reliance on a lower interest rate as per a recent High Court decision.

Conclusion:
The appeal was allowed, and the appellant was held entitled to interest at the rate of 12% on the refunded pre-deposit amount from the date of deposit to the date of payment. The Tribunal emphasized adherence to the amended Section 35FF and relevant judicial precedents.