Pre-deposit refund interest: early Cenvat credit was only procedural, and delayed refund attracted no recoverable demand.

Refund entitlement on a pre-deposit accrued when the assessee succeeded in appeal, and taking credit of the amount in the Cenvat account before a formal sanction order was treated as only a procedural lapse. The refund was not dependent on a separate application in those circumstances, because the department had already been informed and the appellate order had established the entitlement. The governing position on delayed refund, including the statutory scheme under section 35FF, supported interest where the refund was delayed. On these facts, interest was not recoverable and the Revenue's demand was unsustainable.

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Issues: Whether interest was payable on the refunded pre-deposit when the assessee had taken credit of the amount before a formal sanction order was passed.

Analysis: The pre-deposit was made during the pendency of the appeal and the assessee succeeded in appeal, thereby becoming entitled to refund of the amount. The judgment treats the assessee's act of taking credit in the Cenvat account before formal sanction as a procedural lapse only, since the refund entitlement had already accrued and the department had been informed by letter along with the appellate order. The order also applies the principle that refund of pre-deposit is not dependent on a separate application in such circumstances, and that interest on delayed refund is payable under the governing legal position, including the statutory scheme introduced by section 35FF.

Conclusion: Interest was not recoverable on the facts, and the demand raised by Revenue was unsustainable.

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