Court awards 12% interest to company on pre-deposit refund, rejects lower rate argument

The court ruled in favor of the petitioner, a private limited company, in a case concerning the entitlement to interest on a pre-deposit refund. The court held that the petitioner was entitled to interest from three months after the Tribunal's order, as mandated by relevant notifications. Regarding the rate of applicable interest, the court awarded 12% per annum based on precedents and relevant judgments, rejecting the respondent's argument for a lower rate. The court directed the respondents to pay the petitioner 12% interest per annum from the specified date until the refund date, within one month from the judgment date.

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Issues Involved:
1. Entitlement to interest on refund of pre-deposit.
2. Rate of applicable interest on the refund.

Detailed Analysis:

1. Entitlement to Interest on Refund of Pre-Deposit:
The petitioner, a private limited company, sought interest on a pre-deposit of Rs. 1,15,15,214/- made under protest during an appeal process. The appellate Tribunal ruled in favor of the petitioner on 18.11.2002, and the Supreme Court dismissed the Revenue's appeal on 28.07.2015, directing the refund of the excess duty paid. The petitioner claimed interest from the expiry of three months post the Tribunal's order until the actual refund date. The respondents argued that interest was only due from three months post the Supreme Court's order, as the petitioner applied for the refund only after this date.

The court noted that the relevant notifications (dated 02.01.2002 and 08.12.2004) mandated the refund of pre-deposits within three months of the appellate Tribunal's favorable order, regardless of when the refund application was submitted. Thus, the petitioner was entitled to interest from three months after the Tribunal's order (18.11.2002).

2. Rate of Applicable Interest:
The petitioner claimed interest at 12% per annum, citing the Supreme Court's decision in Commissioner of Central Excise v. ITC Limited [2005 (179) E.L.T. 15 (S.C.)], which directed payment of 12% interest on delayed refunds. The respondents contended that the applicable interest rate was 6% per annum, as per the notification dated 12.09.2003.

The court referred to the Supreme Court's judgment in ITC Limited, which set a precedent for awarding 12% interest on delayed refunds. Other relevant judgments, including Kuil Fire Works Industries v. Collector of Central of Excise [1997 (95) ELT 3 (SC)] and Madura Coats Pvt. Ltd. v. Commissioner of C. Ex., Kolkata – IV [2012 (285) E.L.T. 188 (Cal.)], were also considered, reinforcing the 12% interest rate. The court concluded that the petitioner was entitled to 12% interest per annum from the expiry of three months post the Tribunal's order.

Conclusion:
The court directed the respondents to pay the petitioner interest at 12% per annum from three months after 18.11.2002 until the refund date, adjusting any interest already paid, within one month from the judgment date. The writ petition was disposed of accordingly.

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