2025 (2) TMI 373 - AT - Central Excise

Interest on the refund of the Cenvat credit that was reversed following the issuance of SCN - refund amount should be treated as a revenue deposit or not - HELD THAT - Apparently and admittedly there is no written protest ever raised by the appellant for reversing the said amount of credit. It is also an apparent fact that initially the entire amount was held to have been wrongly availed credit. However this Tribunal vide final order dated 04.07.2011 has partly allowed the availment of Cenvat credit and ordered reversal of the remaining directing the Commissioner (Appeals) to re-quantifying the amount of reversal of Cenvat credit. In view of those directions the amount of the eligible Cenvat credit to the appellant was quantified. However the Cenvat credit of such amount for which the refund claim was filed was held to be ineligible Cenvat credit and thus was ordered to be reversed by the appellant and got reversed also. The said amounts stand appropriated by the adjudication order - Also for the reason that the amount of credit reversed was the same amount as was proposed to be reversed vide the six show cause notices. This reversal to my opinion amounts to appropriation. Appropriation is the act of setting aside money for a specific purpose. The reversal of this amount by the appellant on his own post issuance of show cause notice proposing the said reversal is therefore nothing but the appropriation of the amount towards duty. The bare perusal of the provision reveals that the liability of interest on delayed refunds vis- -vis amount of duty arises only when the amount is not refunded within three months from the date of receipt of the application/claim. Since admittedly the refund claim was sanctioned within three months from the date of respective application the appellant is held not entitled to claim interest on the amount of refund. Though the Hon ble Madras High Court in the case M/s Pricol Ltd 2015 (3) TMI 735 - MADRAS HIGH COURT has held that a consistent view is being taken by the courts that any amount which is deposited during the pendency of adjudication proceedings or investigation is in the nature of deposit made under protest but as already observed above there is no evidence of the reversal of Cenval credit to have been made under protest rather the same is held to be an act appropriation on part of the appellant i.e. reversing the utilized amount of Cenvat credit for the reason that the appellant was alleged to not to be entitled for the said credit. In the given circumstances the entire case laws as relied upon by the appellant is held not applicable to the present case. Conclusion - In the absence of evidence the amount is treated as appropriated duty not eligible for interest under Section 11BB if refunded within the statutory period. All the four appeals are hereby dismissed.

Summary

ISSUES PRESENTED and CONSIDERED

The core legal questions considered in this judgment are:

• Whether the appellant is entitled to interest on the refunded amount of Cenvat credit, which was initially reversed following the issuance of show cause notices.
• Whether the amount reversed by the appellant qualifies as a "revenue deposit" or an "appropriation" of duty.
• The applicability of Sections 11B and 11BB of the Central Excise Act regarding the interest on delayed refunds.
• The relevance and applicability of precedents cited by the appellant in support of their claim for interest.

ISSUE-WISE DETAILED ANALYSIS

Entitlement to Interest on Refunded Amount

• Relevant Legal Framework and Precedents: The legal framework revolves around Sections 11B and 11BB of the Central Excise Act, which govern the refund of duties and interest on delayed refunds. The appellant relied on various precedents, including the Tribunal's decisions in Parle Agro Pvt. Ltd. Vs. Commissioner of Central Excise, Noida and Shahi Exports Ltd. Vs. Commissioner of C. Ex. & S.T., Gurgaon-I, as well as the Supreme Court's decision in Sandvik Asia Ltd. Vs. Commissioner of Income Tax-I, Pune.
• Court's Interpretation and Reasoning: The Tribunal emphasized that the entitlement to interest on refunds arises only if the refund is delayed beyond three months from the date of the refund application, as per Section 11BB. The Tribunal found that the refunds were sanctioned within the stipulated period, thus negating the claim for interest.
• Key Evidence and Findings: The Tribunal noted that the appellant reversed the Cenvat credit following the issuance of show cause notices, and there was no evidence of a protest at the time of reversal. The Tribunal viewed this reversal as an appropriation of duty rather than a revenue deposit.
• Application of Law to Facts: The Tribunal applied Section 11BB, concluding that since the refund was processed within three months, no interest was due. The Tribunal also found that the appellant's reliance on precedents was misplaced, as those cases involved deposits made under protest, which was not the case here.
• Treatment of Competing Arguments: The Tribunal addressed the appellant's argument that the amount was a revenue deposit by examining the timing and nature of the reversal. The Tribunal also considered the Department's position that the reversal was voluntary and not under protest.
• Conclusions: The Tribunal concluded that the appellant was not entitled to interest on the refunded amount, as the refund was not delayed beyond the statutory period. The reversal was deemed an appropriation of duty, not a revenue deposit.

Nature of Reversed Amount

• Relevant Legal Framework and Precedents: The legal framework involves the interpretation of what constitutes a revenue deposit versus an appropriation of duty. The appellant cited the decision in Commissioner of Central Excise Coimbatore Vs. M/s Pricol Ltd to argue that deposits during adjudication are under protest.
• Court's Interpretation and Reasoning: The Tribunal interpreted the reversal as an appropriation since it followed the issuance of show cause notices and there was no documented protest from the appellant. The Tribunal distinguished this case from others where deposits were made under protest.
• Key Evidence and Findings: The Tribunal found no evidence of a protest and noted that the reversal matched the amounts proposed in the show cause notices, supporting the view of appropriation.
• Application of Law to Facts: The Tribunal applied the legal principles to determine that the reversal was an appropriation, not a revenue deposit, given the absence of protest and the context of the show cause notices.
• Treatment of Competing Arguments: The Tribunal considered the appellant's argument about the nature of the deposit but found it unsupported by evidence. The Department's argument that the reversal was voluntary was upheld.
• Conclusions: The Tribunal concluded that the reversed amount was an appropriation of duty, not a revenue deposit, thus negating the claim for interest under the cited legal provisions.

SIGNIFICANT HOLDINGS

• Core Principles Established: The Tribunal reinforced the principle that interest on refunds is only applicable if the refund is delayed beyond the statutory period of three months. Additionally, the nature of the deposit (whether under protest or as an appropriation) is crucial in determining entitlement to interest.
• Final Determinations on Each Issue: The Tribunal determined that the appellant was not entitled to interest on the refunded amount, as the refund was processed within the statutory period, and the reversal was an appropriation of duty. The Tribunal upheld the decisions of the lower authorities and dismissed the appeals.