2024 (7) TMI 104 - AT - Central Excise

Pre-deposit or not - duty continued to be paid by the appellants, under protest, during the pendency of the appeal - applicability of provisions of Section 11B and the doctrine of unjust enrichment - Eligibility to claim interest on refund of the amount duty paid or deposited. Pre-deposit or not - duty continued to be paid by the appellants, under protest, during the pendency of the appeal - HELD THAT - The payment of total duty and penalty confirmed was the general rule while grant of stay of the same was an exception subject to the discretion of appellate authorities and the conditions that the appellants may put as deemed fit. After 06.08.2014, the filing of appeals was subject to payment of an amount equal to 7.5 percent or 10 percent, of the duty/ penalty demanded as the case may be. However, there is no provision to discriminate against an appellant who chooses to deposit duty in toto in comparison to the appellant who pays an amount equal to 7.5 percent or 10 percent as the case may be. It appears that before 06.08.2014,the payment of total duty demanded, during the pendency of the appeal, to exercise the right to appeal, would not take away the character of being a deposit from the sums deposited during the pendency of the appeal, under Section 35F or for that matter Section 35L as both fall under Chapter VIA. CBEC vide Circular No 984/08/2014-CX, dated 16.09.2014, issued vide F. No.390/Budget/1/2012-JC clarified that any payment made during investigation shall be counted as part of pre-deposit during the filing of appeal in Central Excise Service Tax matters. The issue as to whether the amount of duty deposited during the pendency of appeal amounts to pre-deposit was deliberated by tribunal and Courts in several Cases. Hon ble Supreme Court in the context of the Maharashtra VAT Act, 2002, in the matter of VVF (India) Ltd Vs State of Maharashtra, 2021 (12) TMI 477 - SUPREME COURT , held that amount pre-deposited under protest prior to assessment order was required to be included in computing amount of mandatory pre-deposit. Hon ble High Court of Gujarat held in the case of C.C. (Preventive)Vs Ghaziabad Ship Breakers Ltd 2010 (10) TMI 151 - GUJARAT HIGH COURT that amount deposited during the pendency of an appeal before the Hon ble Supreme Court would squarely fall within the ambit the Section 129E of the Customs Act, 1962. Section 129E of the Customs Act, 1962 is parimateria with the Section 35F of Central Excise Act,1944. Hon ble High Court held that 'it is an undisputed position that the amount in question had been deposited by the respondent during the pendency of the appeal before the Supreme Court. In the circumstances, it is apparent that the amount so deposited would squarely fall within the ambit of Section 129-E of the Act and has to be treated as pre-deposit. Thus, the contention raised on behalf of the appellant that the amount has been paid by way of duty and not pre-deposit, being contrary to the provisions of section 129E of the Act, does not merit acceptance.' Thus, it appears that the issue whether amounts paid during the pendency of appeal takes the colour of a pre-deposit under Section 35F of the Central Excise, Act 1944, or for that matter Section 35N, has been settled for the period before the amendment of Section 35F w.e.f. 06.08.2014. After 2014, the appellants are required to pay a certain percentage (7.5% or 10% as the case may be) of duty or penalty as the case may be and there is no such requirement to deposit entire duty for preferring an appeal. However, in the instant case, the appeals are filed before the amendment. CBEC circular No 984/08/2014-CX dated 16th September 2014 clarifies that the amended provisions apply to appeals filed after 6th August, 2014 - any amount deposited during the pendency of an appeal before the High Court or the Supreme Court would also be by way of deposit under Section 129E of the Act and has to be treated accordingly. The amounts, deposited/paid by the appellants, during the pendency of the appeals, have to be considered as a mandatory pre-deposit made under Section 35F - The legislative intent that there can be two types of deposit, i.e. of full amount payable under main proviso to section 35F and partial payment as decided by Commissioner (Appeals) or CESTAT, is made clear by the introduction of Section 35F, w.e.f. 10.05.2008, so as to provide for the payment of interest in respect of deposits made in pursuance of deposits made only under First proviso to Section 35F. This difference was obliterated by the amendment w.e.f. 06.08.2014 prescribing a uniform pre-deposit, under Section 35F, as percent of duty or penalty confirmed, as a pre-condition for appeal and providing for payment of interest, under Section 35FF, for all deposits made under 35F. Whether the provisions of Section 11B and the doctrine of unjust enrichment are applicable to such payments? - HELD THAT - In the instant case, the amount was deposited by the appellants consequent upon the order passed by the Commissioner (Appeals); as both CESTAT and Hon ble Apex Court declined to grant stay of the amounts involved, the appellants continued to pay the amount under protest, on the clearances of clinker made by them for captive consumption. Till 2015, the matter was under litigation and therefore, the amount deposited, to exercise the right to appeal, has to be treated as deposits made under Section 35F and Section 35L - The question involved in the instant case is as to whether the refund of pre-deposit is subject to the rigors of unjust enrichment and as to whether the presumption that incidence of duty has been passed on is applicable and not the question of equity where the passing on of incidence is established. The amounts deposited by the appellants, during the pendency of the appeal, are to be considered as a pre-deposit for the purposes of Section 35F and the return of which is not governed by the rigors of Section 11B - The certificate was issued after going through the accounts of the appellants and after satisfying himself about the truthfulness of the same. A certificate given by a professional cannot be dis-regarded unless it is proved to be blatantly wrong and contrary to the facts and evidence available on the hand. Thus, the certificate given by the Cost/Chartered Accountant has an evidentiary value and cannot be rejected in a half-handed manner. The impugned order having been issued without giving reasons as to why the same has not been taken into account cannot be held to be legally sustainable. The presumption under Section 11B being a rebuttable one, such rebuttal put forward by the appellant is required to be considered in the facts and circumstances of the case and the nature of the product - the amount paid by the appellants is a pre-deposit under Section 35F and as such the same is to be returned without subjecting the same to the provisions of Section 11B. Payment of interest on the delayed payment of refund of pre-deposit - HELD THAT - A perusal of the provisions of Section 35FF gives a clear understanding that w.e.f. 10.05.2008; a provision has been made to grant interest on the refund of amounts deposited under the proviso to Section 35F. The wordings used in the new Section 35FF, makes it unambiguously clear that a provision to pay interest is made in respect of amounts deposited in terms of the orders passed by the Commissioner (Appeals) or the Appellate Tribunal (hereinafter referred to as the appellate authority), under the first proviso to section 35F.The Section as it stood before 06.08.2014 did not provide for payment of any interest on the deposits made under the main Section 35F. However, it is provided w.e.f. 06.08.2014 that interest shall be sanctioned on the delayed refund of the deposit made under Section 35F - w.e.f. 06.08.2014, the amended Section 35FF provides for payment of interest on the delayed refund of amount deposited under Section 35F irrespective of the fact whether such payment was under main Section or first proviso of Section 35F. Therefore, the appellants are eligible for interest on the delayed refund of amounts deposited by them after 06.08.2014. Appeal allowed in part.

Summary

Issues Involved:
1. Whether the duty paid during the pendency of the appeal qualifies as a pre-deposit for the purposes of Section 35F of the Central Excise Act, 1944.
2. Whether the provisions of Section 11B and the doctrine of unjust enrichment are applicable to such payments.
3. Whether the appellants are eligible to claim interest on the amount of duty paid or deposited, and if so, at what rate.

Detailed Analysis:

1. Pre-deposit Qualification under Section 35F:

The tribunal examined whether the duty paid by the appellants during the pendency of the appeal qualifies as a pre-deposit under Section 35F of the Central Excise Act, 1944. The appellants argued that the amounts paid were under protest and should be treated as pre-deposits. They cited various judgments and CBEC circulars to support their claim that such payments, made to exercise the right of appeal, are indeed pre-deposits. The tribunal agreed with the appellants, referencing multiple judicial precedents, including the case of Ghaziabad Ship Breakers Ltd. and Suvidhe Ltd., which held that amounts paid during the pendency of an appeal are considered pre-deposits under Section 35F. The tribunal concluded that the payments made by the appellants during the pendency of their appeals qualify as pre-deposits under Section 35F.

2. Applicability of Section 11B and Doctrine of Unjust Enrichment:

The tribunal addressed whether the provisions of Section 11B and the doctrine of unjust enrichment apply to the refund of pre-deposits. The appellants contended that Section 11B is not applicable to pre-deposits and that the doctrine of unjust enrichment does not apply. They relied on several judgments, including Suvidhe Ltd. and Pricol Ltd., which established that pre-deposits are not subject to the refund provisions of Section 11B. The tribunal agreed, noting that the CBEC circulars and various court decisions consistently held that pre-deposits are not considered duty payments and are not subject to the doctrine of unjust enrichment. The tribunal concluded that the refund of pre-deposits is not governed by Section 11B and the doctrine of unjust enrichment.

3. Eligibility for Interest on Refund:

The tribunal examined whether the appellants are eligible for interest on the delayed refund of pre-deposits and at what rate. The appellants argued that they are entitled to interest under Section 35FF, which provides for interest on delayed refunds of pre-deposits. The tribunal noted that Section 35FF, as amended, provides for interest on delayed refunds of amounts deposited under Section 35F. The tribunal held that the appellants are entitled to interest on the delayed refund of amounts deposited on or after 06.08.2014, as per the statutory rate prescribed. However, for amounts deposited before 06.08.2014, the tribunal held that interest is not payable as per the provisions of Section 35FF prior to its amendment.

Conclusion:

The tribunal allowed the appeals partially, concluding that:
1. The amounts paid by the appellants during the pendency of the appeals are pre-deposits under Section 35F.
2. The refund of these pre-deposits is not subject to the provisions of Section 11B and the doctrine of unjust enrichment.
3. The appellants are entitled to interest on the delayed refund of amounts deposited on or after 06.08.2014, at the statutory rate prescribed.

The tribunal directed that the refund be granted after deducting the Cenvat Credit availed by the appellants on the inputs used in the manufacture of clinker during the disputed period.