2022 (9) TMI 1281 - AT - Central Excise

Reduction in the amount of refund, which was in the nature of predeposit - whether interest have been rightly allowed under Section 35FF of the Act? - principles of unjust enrichment - time limitation - HELD THAT - A Division Bench of this Tribunal in the case of Parle Agro Ltd 2021 (5) TMI 870 - CESTAT ALLAHABAD , under similar facts and circumstances, have held that interest is payable also on the amount paid during investigation/audit as well as the amount of pre-deposit and further such interest is payable @ of 12% per annum, following the ruling of Hon'ble Supreme Court in the case of SANDVIK ASIA LIMITED VERSUS COMMISSIONER OF INCOME-TAX AND OTHERS 2006 (1) TMI 55 - SUPREME COURT . Hon'ble Madras High Court in the case of THE COMMISSIONER OF CENTRAL EXCISE, COIMBATORE VERSUS M/S. PRICOL LTD., THE CUSTOMS, EXCISE SERVICE TAX APPELLATE TRIBUNAL 2015 (3) TMI 735 - MADRAS HIGH COURT have held that any amount deposited during investigation has to be treated as pre-deposit and the same is neither hit by limitation nor by the clause of unjust enrichment for the purpose of refund. Thus, the learned Commissioner (Appeals) have erred in holding that the amount of Rs. 50,000/- is hit by limitation and unjust enrichment, and further interest is not payable under section 35FF - the appellant is entitled to refund of the balance amount of Rs. 50,000/- which was deposited on 30th January 2003 - further appellant is entitled to interest on the full amount of Rs. 8.5 lakhs from the date of deposit till the date of refund @ of 12% per annum under the provisions of Section 35FF of the Act - appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Reduction of refund amount in the nature of predeposit
2. Allowance of interest under Section 35FF of the Act

Analysis:
1. The appellant, engaged in the manufacture of SS Ingots, deposited amounts during an investigation in December 2002 and January 2003 towards estimated duty on alleged shortages. A show cause notice issued in September 2006 confirmed a demand for central excise duty and disallowed Cenvat credit. After appeals, the demand was partially set aside in a final order dated January 2020, confirming duty of Rs. 5,76,425.

2. Subsequently, the appellant sought a refund of the deposited amounts, including a pre-deposit made pursuant to a stay order. The Adjudicating Authority allowed a refund of the principal amount but denied interest. Both the appellant and the revenue appealed before the Commissioner (Appeals), with the revenue arguing that the claim for the Rs. 50,000 deposit in January 2003 was time-barred under Section 11B of the Act. The Commissioner (Appeals) held the refund of Rs. 8 lakhs to be valid but found the refund of Rs. 50,000 time-barred and hit by unjust enrichment.

3. The Commissioner (Appeals) also addressed the issue of interest under Section 35FF, stating that interest is payable only on the amount required to be deposited at the time of filing the appeal. The appellant contended that interest should be paid on amounts paid during investigation and pre-deposit, citing precedents where interest was allowed under similar circumstances by higher authorities and courts.

4. The Tribunal considered relevant case laws, including decisions by Division Benches and High Courts, supporting the payment of interest on amounts deposited during investigations. Relying on these precedents, the Tribunal held that the appellant was entitled to a refund of the Rs. 50,000 deposit and interest on the full amount of Rs. 8.5 lakhs at a rate of 12% per annum from the date of deposit till the date of refund under Section 35FF of the Act.

5. Consequently, the Tribunal allowed the appeal, setting aside the impugned order. It directed the Adjudicating Authority to grant the balance refund and interest within 60 days from the date of receipt of the order, emphasizing the appellant's entitlement to both the refund and interest as per the provisions of the Act.