2022 (3) TMI 326 - AT - Service Tax

Rejection of interest on the amount of pre-deposit - Section 35FF of the Central Excise Act - HELD THAT - The issue herein is squarely covered by the precedent decision of this Tribunal in M/S. PARLE AGRO PVT. LTD. VERSUS COMMISSIONER, CENTRAL GOODS SERVICE TAX, NOIDA (VICE-VERSA) 2021 (5) TMI 870 - CESTAT ALLAHABAD , wherein interest on pre-deposit (made during investigation) have been enhanced from 6% to 12%, following the ruling of the Apex Court in SANDVIK ASIA LIMITED VERSUS COMMISSIONER OF INCOME-TAX AND OTHERS 2006 (1) TMI 55 - SUPREME COURT . The Adjudicating Authority is further directed to grant interest @ 12% per annum from the date of deposit till the date of refund. Such interest should be granted within a period of two months from the date of receipt or service of the copy of this order. The Appeal is allowed - decided in favor of appellant.

Summary

Issues:
1. Rejection of claim of interest on pre-deposit under Section 35FF of the Central Excise Act.

Analysis:
The appeal in this case revolves around the rejection of the claim of interest on the pre-deposit amount as required under Section 35FF of the Central Excise Act. The appellant's Director was compelled to deposit ?50 lakhs during a search conducted by DGCEI officers, despite no provision for duty collection during such investigations. The appellant later sought a refund of this amount, leading to a show cause notice proposing a duty demand of ?22,91,574 along with interest and penalty. The Adjudicating Authority confirmed this demand, leading to subsequent appeals and refund orders. The appellant contended that interest on the pre-deposit should be allowed under Section 35FF, highlighting a mistake of law in the impugned order.

The appellant's argument was supported by the contention that interest on the pre-deposit is permissible under Section 35FF of the Central Excise Act. The Authorized Representative for the Revenue, however, relied on the impugned order and cited a ruling of the Delhi High Court. The Tribunal, after considering the arguments, referred to a precedent decision in Parle Agro (P) Ltd. vs. Commissioner, CGST, where interest on pre-deposit made during investigation was enhanced from 6% to 12% following the Supreme Court's ruling in Sandvik Asia Ltd. The Tribunal directed the Adjudicating Authority to grant interest at 12% per annum from the date of deposit till the date of refund, emphasizing that the interest should be paid within two months from the date of the order. Consequently, the appeal was allowed, setting aside the impugned order.

In conclusion, the Tribunal's decision in this case clarifies the entitlement to interest on pre-deposit amounts under Section 35FF of the Central Excise Act. By referencing relevant precedents and legal provisions, the Tribunal upheld the appellant's claim for interest at a higher rate, emphasizing the need for timely payment of such interest. The judgment serves as a significant precedent for similar cases involving claims for interest on pre-deposit amounts in excise matters.