The CESTAT, Allahabad in the case of M/S INDIA YAMAHA MOTOR PVT. LTD. VERSUS COMMISSIONER OF CENTRAL GOODS & SERVICES TAX, GREATER NOIDA - 2024 (9) TMI 112 - CESTAT ALLAHABAD allowed appeal and ruled that even if the interest is not claimed specifically by an Assessee, that does not absolve the Adjudicatory Authority from mandatory legal responsibility to grant interest on the amount refunded.
Facts:
M/s India Yamaha Motor Pvt. Ltd. (“the Appellant”) was engaged in manufacture inter-alia of motor cycles, scooters, parts and accessories thereof, falling under Chapter 87 of the erstwhile Central Excise Tariff Act, 1985 (“the Central Excise Tariff Act”). The Appellant filed an appeal against an Order dated June 21, 2017 before the Commissioner, CGST (Appeals) and the Appellant made a pre-deposit for filing of such appeal. The appeal of the Appellant was accepted vide Order dated May 08, 2019 by the Commissioner (Appeals). Thereafter, the Appellant filed an application for refund of the amount pre-deposited.
The Assistant Commissioner vide Order dated February 06, 2020 allowed the refund of the amount pre-deposited. However, the Appellant was not granted statutory interest on the amount so refunded in terms of Section 35FF of the Central Excise Act, 1944 (“the Excise Act”).
Being aggrieved with the part of the Order dated February 06, 2020 by which the statutory interest on refund was not granted, the Appellant preferred an appeal before the Commissioner (Appeals) CGST. The Commissioner (Appeals) CGST vide Order Dated October 09, 2020 (“the Impugned Order”) held as follows:-
- that the issue of interest was not a part of the proceedings before the Ld. Adjudicating Authority as the same is not coming from the order;
- that the payment of pre-deposit amount was not made in cash, but by way of debit from the ITC account;
- that the amount of pre-deposit exceeded the restricted amount of Rs.10 crores as mentioned in the proviso to Section 35F of the Excise Act;
- that the issues of whether interest is applicable on the pre-deposit amount made by the Appellant and the restricted amount under Section 35F of the Excise Act shall apply for the purpose of interest under Section 35FF of the Excise Act, have to be decided at the original stage; and
- that the Appellant is directed to approach the Ld. Adjudicating Authority since the issue of interest was not dealt with by the Ld. Adjudicating Authority in the order.
Hence, aggrieved by the Impugned Order, the Appellant preferred appeal before the CESTAT.
Issue:
Whether interest is applicable on refundable pre-deposit of the appeal?
Held:
The CESTAT, Allahabad in M/S INDIA YAMAHA MOTOR PVT. LTD. VERSUS COMMISSIONER OF CENTRAL GOODS & SERVICES TAX, GREATER NOIDA - 2024 (9) TMI 112 - CESTAT ALLAHABAD held as under:
- Observed that, Section 35FF of the Excise Act mandates that when the Appellant is refunded the amount of pre-deposit earlier paid in terms of Section 35F of the Excise Act, consequent upon the order from the Appellate Authority, interest shall also be paid to the Appellant from the date of payment of pre-deposit amount till the refund of such amount. Thus, payment of interest along with refund under Section 35FF of the Excise Act, is not dependent on whether the same has been claimed by the Assessee or not. The same is obvious.
- Opined that, in case, refund is paid to the Appellant consequent upon specific order for consequential relief from the Appellate Authority, the concerned Authority is under a statutory obligation to pay interest from the date of payment of pre-deposit amount till the refund of such amount. Reason being, Section 35FF of the Excise Act uses the expression “there shall be paid to the Appellant interest”, thereby indicating that payment of interest is not discretionary but mandatory under the provision. In the present case, Department is not disputing that Appellant has made the pre-deposit of more than Rs.10 crore under Section 35F of the Excise Act on September 05, 2017, which was post August 06, 2014 when Section 35FF of the Excise Act was amended.
- Noted that, even if the interest is not claimed specifically by an Assessee, that does not absolve the Adjudicatory Authority from mandatory legal responsibility to grant interest on the amount refunded. The requirement to pay interest under Section 35FF of the Excise Act is by operation of law, it is not to be claimed by the person in respect of whom consequential benefit is already directed by the Appellate Authority. In the present case, once the Ld. Adjudicating Authority committed a legal error in not granting interest on refund of pre-deposit while passing the Order and appeal against the Order is filed, then the Ld. Appellate Authority is bound to correct the error. The finding given by the Ld. Commissioner (Appeals) in the Impugned Order that question of interest does not arise at this stage, is not legally sustainable.
- Relied on, the case of M/S CADILA PHARMACEUTICALS LTD VERSUS COMMISSIONER OF SERVICE TAX-SERVICE TAX – AHMEDABAD - 2018 (1) TMI 424 - CESTAT AHMEDABAD the Tribunal categorically held that Section 35FF of the Excise Act itself provides for payment of interest on refund of pre-deposit amount and the same does not differentiate between the payment of pre-deposit made in cash or by debit in the Cenvat credit account.
- Noted that, Section 35F of the Excise Act restricts the pre-deposit amount as Rs.10 crore does not mean that Assessee will not be entitled for interest on refund of pre-deposit amount under Section 35FF the Excise Act even if it paid the pre-deposit amount more than Rs.10 crore. In other words, when the Department accepted the pre-deposit amount exceeding Rs.10 crore at the time of filing of appeal without any objection and kept such amount with it till the disposal of appeal, Department cannot now deny interest upon refund of such pre-deposit amount by contending that the pre-deposit amount exceeds Rs.10 crore. Hence, the Impugned Order was set aside and the appeal filed by the Appellant was allowed with consequential relief, as per law.
Our Comments:
Section 35F of the Excise Act was substituted vide the Finance Act (No.2) Act, 2014. It governs “Deposit of certain percentage of duty demanded or penalty imposed before filing appeal”. Section 35F of the Excise Act states that the Tribunal or the Commissioner (Appeals), as the case may be, shall not entertain any appeal certain cases.
Section 35FF of the Excise Act was also substituted vide the Finance (No.2) Act, 2014. It governs “Interest delayed refund of amount deposited under section 35F”. It states that where an amount deposited by the appellant under section 35F of the Excise Act is required to be refunded consequent upon the order of the appellate authority, there shall be paid to the appellant interest at such rate, not below 5% and not exceeding 60% per annum as is for the time being fixed by the Central Government, by notification in the Official Gazette, on such amount from the date of payment of the amount till, the date of refund of such amount. However, the amount deposited under section 35F of the Excise Act, prior to the commencement of the Finance (No.2) Act, 2014, shall continue to be governed by the provisions of section 35FF as it stood before the commencement of the said Act.
(Author can be reached at [email protected])
9911796707
