2025 (1) TMI 1149 - AT - Central Excise

Rate of interest on the refund amount collected during investigation - whether the appellant is entitled to interest on the refund amount @6% per annum as granted by the Commissioner (Appeals) or @12% per annum as claimed by the appellant? - HELD THAT - In view of the various decisions of the High Courts and various Benches of the Tribunal wherein it has been consistently held that interest on refund of deposit made during the investigation is required to be computed @12% per annum. The jurisdictional High Court of this Tribunal has already held that rate of interest applicable in such cases is 12% per annum as held in the cases of COMMISSIONER OF CENTRAL EXCISE PANCHKULA VERSUS RIBA TEXTILES LTD. 2022 (5) TMI 1531 - PUNJAB AND HARYANA HIGH COURT and M/S. SUNRISE IMMIGRATION CONSULTANTS PVT. LTD. VERSUS UNION OF INDIA AND ORS. 2023 (6) TMI 411 - PUNJAB AND HARYANA HIGH COURT . In view of the decisions of the Hon ble High Courts in the cases cited wherein the Hon ble High Court has granted the interest @ 12% per annum following the ratio of the decisions of the High Court and hold that the appellant is entitled to the rate of interest @ 12 % per annum on the amount deposited during investigation. Conclusion - The appellant is entitled to an interest rate of 12% per annum on the refund amount deposited during the investigation. This conclusion was based on the consistent application of this rate in similar cases by various High Courts and the Tribunal itself. The Original Authority is directed to compute the Interest @ 12% instead of @ 6 % as directed by the Commissioner appeal - Appeal allowed.

Summary

The present case revolves around the determination of the appropriate interest rate applicable to a refund amount deposited during an investigation. The appellant contested the interest rate sanctioned by the Commissioner (Appeals), which was set at 6% per annum, arguing instead for a 12% rate.

The core legal issue considered was whether the appellant is entitled to an interest rate of 6% or 12% per annum on the refund amount deposited during the investigation. The appellant claimed a higher interest rate based on established precedents, while the Commissioner (Appeals) applied a 6% rate, citing decisions from the Supreme Court.

The relevant legal framework includes the Central Excise Act, 1944, particularly Section 11BB, which deals with interest on delayed refunds. However, the statute does not specify the interest rate for amounts deposited during investigations, leading to reliance on judicial precedents and equitable considerations. The appellant referenced several decisions, including those from the Supreme Court and various High Courts, which have consistently held that a 12% interest rate is applicable in similar circumstances.

The Tribunal's interpretation focused on the absence of a statutory provision specifying the interest rate for amounts deposited during investigations. The Tribunal noted that where a statute is silent, interest should be awarded at a reasonable rate on equitable grounds. This interpretation aligns with the Supreme Court's guidance in cases where statutory provisions do not regulate interest rates.

Key evidence and findings highlighted the consistent judicial stance favoring a 12% interest rate for refunds of amounts deposited during investigations. The Tribunal referenced decisions from the Punjab and Haryana High Court, the Madhya Pradesh High Court, and the Meghalaya High Court, all supporting a 12% interest rate. These decisions emphasized that deposits made during investigations, not being quantified claims, do not attract the implied bar under Section 11B of the Central Excise Act.

In applying the law to the facts, the Tribunal considered the appellant's reliance on precedent and the equitable principle of awarding reasonable interest rates in the absence of statutory guidance. The Tribunal found that the appellant's claim for a 12% interest rate was supported by a substantial body of case law, which consistently upheld this rate for similar refunds.

The Tribunal addressed competing arguments by examining the rationale behind the Commissioner (Appeals)'s decision to apply a 6% interest rate, which was based on certain Supreme Court decisions. However, the Tribunal distinguished these cases, noting that they pertained to different statutory contexts and did not directly apply to the present situation.

The Tribunal concluded that the appellant is entitled to an interest rate of 12% per annum on the refund amount deposited during the investigation. This conclusion was based on the consistent application of this rate in similar cases by various High Courts and the Tribunal itself.

Significant holdings from the judgment include the Tribunal's affirmation of the 12% interest rate for refunds of amounts deposited during investigations. The Tribunal emphasized that this rate is justified by both precedent and the equitable principle of awarding reasonable interest in the absence of statutory regulation. The Tribunal directed the Original Authority to compute the interest at 12% per annum, thereby allowing the appellant's appeal.

The final determination on the issue was the setting aside of the impugned order, with the Tribunal instructing the Original Authority to apply a 12% interest rate instead of the 6% rate previously sanctioned. This decision aligns with the established judicial trend and provides clarity on the applicable interest rate in similar refund cases.