Limitation on Pre-Deposit Refunds in Excise Act Appeal

The tribunal held that the limitation under Section 11B of the Central Excise Act does not apply to pre-deposits made under Section 35F for availing the right of appeal. Refunds of such pre-deposits are not subject to Section 11B and are to be granted upon appeal success. Interest under Section 11BB is not applicable if the refund is rejected within three months of the application. Consequently, the refund of the pre-deposit was allowed, while the request for interest on the pre-deposit was denied.

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Issues Involved:
1. Applicability of Section 11B of the Central Excise Act to the refund of pre-deposit made under Section 35F.
2. Entitlement to interest on the refund of pre-deposit under Section 11BB of the Act.

Issue-wise Detailed Analysis:

1. Applicability of Section 11B of the Central Excise Act to the refund of pre-deposit made under Section 35F:

The appellants filed a refund claim of Rs. 20,00,000/- for a pre-deposit made as a condition for the hearing of their appeal. The adjudicating authority rejected the refund claim as time-barred, and this decision was upheld by the Commissioner (Appeals). The appellants argued that the limitation prescribed under Section 11B of the Central Excise Act is not applicable to pre-deposits made under Section 35F since such pre-deposits are not in the nature of duty but are merely deposits for availing the right of appeal. They cited several case laws, including *Suvidhe Ltd. Vs. UOI* and *Shree Ram Food Industries Vs. Union Bank of India*, to support their claim that Section 11B does not apply to pre-deposits.

The tribunal found that the issue of applicability of Section 11B on deposits made under Section 35F is well-settled by the Hon'ble Bombay High Court in *Suvidhe Ltd. Vs. UOI*, which held that a deposit under Section 35F is not a payment of duty but only a pre-deposit for availing the right of appeal. Consequently, such amounts are bound to be refunded when the appeal is allowed, and the provisions of Section 11B cannot be applied. The tribunal also noted that the Central Board of Excise and Customs (CBEC) had issued a circular affirming that the law relating to the refund of pre-deposit had become final.

Considering these high court decisions and the CBEC circular, the tribunal concluded that the limitation under Section 11B cannot apply to the present case. The judgments cited by the respondent were found inapplicable as they related to different contexts or were issued before the relevant CBEC circular.

2. Entitlement to interest on the refund of pre-deposit under Section 11BB of the Act:

The appellants sought interest on the refund under Section 11BB of the Act read with Section 35FF. The tribunal referred to its previous judgment in *AFCONS Infrastructure Ltd. Vs. CCE, Visakhapatnam*, which clarified that Section 11BB provides for interest on delayed refunds of duty and not on deposits. The tribunal held that interest under Section 11BB is applicable only if the refund is not made within three months from the date of receipt of the application for refund. Since the show cause notice for rejection of the refund claim was issued within three months, the tribunal concluded that interest on the refund is not applicable in this case.

Conclusion:

(i) The refund of the pre-deposit made in terms of Tribunal Order No. S-228/CAL/98 dated 22.05.1998 is allowed.
(ii) The prayer for interest on the above pre-deposit is rejected.

The appeal is disposed of in the above terms.

(Order pronounced in the Court on 02.08.2017)

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