2021 (12) TMI 285 - AT - Central Excise

Entitlement to interest on refund - claim of interest rejected on the ground that at the time of sanction of refund and appropriation thereof, there was a confirmed demand - mandatory pre-deposit required under Section 35F in respect of appeal pending before the Commissioner (Appeals) - HELD THAT - There is chequered history of the entire case however, the case can be decided brief. The refund of the appellant was appropriated against the confirmed demand. The said confirmed demand order was under challenge in appeal before the Commissioner (Appeals). The dispute was that whether the appellant s payment of pre-deposit through cenvat account is legal and correct for entertaining the appeal. The Commissioner (Appeals) was of the view that the appellant was supposed to make pre-deposit payment in cash. This issue has been taken to the Hon ble Gujarat High Court. The Hon ble Gujarat High Court in CADILA HEALTH CARE PVT LTD. VERSUS UNION OF INDIA 2018 (11) TMI 80 - GUJARAT HIGH COURT held that the appellant s payment of pre-deposit through cenvat in appeal filed before the Commissioner (Appeals) is acceptable. The appeal filed before Commissioner (Appeals) along with the pre-deposit, the demand amount of the said case could not have been adjusted against the sanctioned refund, therefore, the refund ought to have been paid on the date of sanction itself - Since the refund was payable on the date of sanction, the appellant is entitled for the interest from the date of sanction till the date of payment of refund amount. Appeal allowed - decided in favor of appellant.

Summary

Issues:
Appropriation of refund against liabilities covered by another order-in-original, dispute regarding mandatory pre-deposit under Section 35F, rejection of interest claim on refund by adjudicating authority.

Analysis:
The case involved the appellant's refund claim being appropriated against liabilities from another order-in-original while an appeal against the original order was pending. There was a dispute over the mandatory pre-deposit requirement under Section 35F, with the appellant paying through cenvat credit, contrary to the Commissioner's directive for cash payment. The Tribunal initially dismissed the appeal, considering the Commissioner's letter as a regular order. The appellant then approached the High Court, which ruled in favor of the appellant's pre-deposit method, directing a merit-based hearing. The appellant sought interest on the delayed refund period, rejected by the adjudicating authority and upheld by the Commissioner (Appeals), leading to the present appeal.

The appellant argued that the appropriation was incorrect as the demand was subjudice when the refund was offset against it. The High Court's decision validated the appellant's pre-deposit method, entitling them to the refund and interest from the date of sanction. The Revenue contended that without pre-deposit or stay, the demand was recoverable, justifying the appropriation and rejecting the interest claim. The Member (Judicial) reviewed the case history and determined that the refund should not have been offset against the demand under appeal. As the refund was due from the sanction date, interest was warranted until payment. Consequently, the impugned orders were set aside, and the appeals were allowed with appropriate relief as per the law.

In conclusion, the Tribunal's decision favored the appellant, emphasizing the incorrect appropriation of the refund against a disputed demand and the entitlement to interest from the sanction date. The judgment rectified the previous rulings, aligning with the High Court's directive on the pre-deposit method and ensuring the appellant's right to the refund with accrued interest.