2024 (5) TMI 558 - AT - Central Excise

Interest on the pre-deposit to be paid under Section 35FF of Central Excise Act, 1944 or under the provisions of Section 11B of the Act - HELD THAT - Section 35FF is very clear after the amendment brought vide Finance Act 2014 interest will be paid on the pre-deposit from the date of such pre-deposit till the date of payment of refund. The same principle has been laid down by the Tribunal in a number of cases. The principal Bench in the case of M/S. RAGHUVEER METAL INDUSTRIES LIMITED, SHRI RAJ KUMAR POKHARNA, SHRI SUNIL KUMAR POKHARNA AND M/S. RAJASTHAN COMMERCIAL HOUSE VERSUS COMMISSIONER OF C.G. ST., JAIPUR-I 2023 (12) TMI 371 - CESTAT NEW DELHI where it was held that 'it is clear that the amount in question was not deposited under Section 35F, however is akin to predeposit for the reasons as discussed above. Resultantly, we hold that the said proviso is not applicable to the given set of circumstances.' The grant of interest on the refund of pre-deposit is consequential. However, the rate of interest cannot be arbitrarily fixed by the Tribunal and interest is to be given at the rate prescribed under the statute as held by the Hon ble Apex Court in the case of UNION OF INDIA ORS. VERSUS M/S. WILLOWOOD CHEMICALS PVT. LTD. ANR. AND UNION OF INDIA ORS. VERSUS M/S. SARAF NATURAL STONE ANR. 2022 (4) TMI 980 - SUPREME COURT which was followed by the Tribunal in the case of BOCHASANWASI SHRI AKSHARPURUSHOTTAM SWAMINARAYAN SANSTH VERSUS C.C. -AHMEDABAD 2021 (11) TMI 759 - CESTAT AHMEDABAD . In view of the above, the refund of pre-deposit is governed by the Section 35FF of Central Excise Act 1944 and the rate of interest is governed by the statutory provisions and the notifications issued in this regard from time to time. The appellants are entitled for the payment of interest as per the provisions of Section 35FF and at the rate prescribed therein. The appeal is allowed.

Summary

Issues Involved:
1. Entitlement to Interest on Pre-Deposit Refund
2. Applicable Rate of Interest

Summary:

1. Entitlement to Interest on Pre-Deposit Refund:
The primary issue in this case is whether the appellants are entitled to interest on the pre-deposit paid under Section 35FF of the Central Excise Act, 1944, or under the provisions of Section 11B. The appellants argued that the refund order did not specify any interest to be paid when the refund was sanctioned following the Tribunal's order. They contended that the impugned refund is not of duty and thus governed by Section 35FF, which mandates interest from the date of pre-deposit till the date of refund. The Tribunal found that Section 35FF, as amended by the Finance Act, 2014, clearly states that interest will be paid on the pre-deposit from the date of such pre-deposit till the date of payment of refund.

2. Applicable Rate of Interest:
The appellants sought interest at the rate of 12%, citing various judgments. However, the respondent argued that the rate of interest should be as provided in the statute and not arbitrary. The Tribunal noted that several provisions of the Central Excise Act and related notifications set the rate of interest between 6% to 18%. It concluded that while the grant of interest on the refund of pre-deposit is consequential, the rate of interest cannot be arbitrarily fixed by the Tribunal. The rate of interest is governed by statutory provisions and notifications issued from time to time. The Tribunal held that the appellants are entitled to interest as per Section 35FF at the rate prescribed therein.

Conclusion:
The appeal was allowed, with the Tribunal ruling that the appellants are entitled to interest on the pre-deposit refund as per Section 35FF of the Central Excise Act, 1944, at the rate prescribed by statutory provisions and relevant notifications.