Appeal granted with interest on delayed refund at 12% per annum. Consequential relief ordered.

The Tribunal allowed the appeal, granting the appellant interest on the delayed refund from the date of deposit till realization at a rate of 12% per annum. The appeal was allowed with consequential relief, as pronounced in court on 27.11.2019.

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Issues Involved:

1. Entitlement to interest on delayed refund from the date of deposit till realization.
2. Rate of interest applicable on the delayed refund.

Detailed Analysis:

Issue 1: Entitlement to Interest on Delayed Refund from the Date of Deposit Till Realization

The appellant filed a refund claim on 8.1.2018 for Rs. 40 lakhs along with interest following a Tribunal order dated 30.11.2017. The Commissioner had previously disallowed Cenvat credit and rebate of duty on exported goods and imposed penalties, which led to the appellant depositing Rs. 40 lakhs and furnishing a bank guarantee of Rs. 10 lakhs. The Tribunal eventually set aside the original order on 30.11.2017, leading to the refund sanctioning authority allowing the refund but rejecting the interest claim. The appellant challenged this rejection, arguing for interest from the date of deposit until realization, as the amount deposited was not a duty.

The Tribunal referenced the case of M/s. Fujikawa Power vs. CCE, Chandigarh-I, where it was observed that interest on delayed refund should be paid after three months from the communication of the appellate authority's order, as per Section 35FF of the Central Excise Act, 1944. However, the Tribunal found that provisions of the Income Tax Act and the Central Excise Act are pari materia, meaning they are similar in nature. Thus, the decision in Sandvik Asia Limited, which dealt with interest on delayed refunds under the Income Tax Act, was applicable. The Tribunal concluded that the appellant is entitled to interest from the date of deposit till realization.

Issue 2: Rate of Interest Applicable on the Delayed Refund

The Tribunal discussed various precedents, including the Hon’ble Kerala High Court decision in Sony Pictures Networks India Pvt. Ltd., which held that the interest on delayed refunds should be at 12% per annum. This rate was also supported by the case of Ghaziabad Ship Breakers Pvt. Ltd., where the Tribunal allowed interest at 12% on refunds of pre-deposits. The Tribunal found that both the Income Tax Act and Central Excise Act provisions on interest for delayed refunds are similar, and thus, the appellant should receive interest at 12% per annum from the date of deposit until the refund is realized.

Conclusion:

The Tribunal allowed the appeal, granting the appellant interest on the delayed refund from the date of deposit till realization at a rate of 12% per annum. The appeal was allowed with consequential relief, as pronounced in court on 27.11.2019.

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