Commissioner (Appeals) incompetent to remand appeal; appellant entitled to interest on refund amount.

The Commissioner (Appeals) was found incompetent to remand the appeal back to the adjudicating authority due to an amendment in the Customs Act, as established in the case of MIL India Ltd. vs. CCE Noida. Additionally, the appellant was deemed entitled to interest on the sanctioned refund amount from the date of deposit, at a rate of 12% per annum, following precedents such as Parle Agro Pvt. Ltd. vs. CC CGST Noida and Marshal Foundary and Engg Pvt Ltd. vs. CGST Faridabad. Consequently, the order was set aside, and the appellant's appeal was allowed.

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Issues Involved:
1. Competence of Commissioner (Appeals) to remand the appeal.
2. Entitlement of the appellant to interest on the sanctioned refund amount from the date of deposit.

Issue-wise Analysis:

1. Competence of Commissioner (Appeals) to Remand the Appeal:
The first issue to be addressed is whether the Commissioner (Appeals) had the authority to remand the appeal to the Original Adjudicating Authority for reconsideration. Section 128A(3) of the Customs Act, 1962, was amended by the Finance Act, 2001. The pre-amendment provision allowed the Commissioner (Appeals) to refer the case back to the adjudicating authority with directions for fresh adjudication. However, the post-amendment provision removed this power, stating that the Commissioner (Appeals) could only confirm, modify, or annul the decision or order appealed against. This amendment specifically took away the power of remand from the Commissioner (Appeals), as affirmed by the Hon’ble Apex Court in the case of MIL India Ltd. vs. CCE Noida. Consequently, the Commissioner (Appeals) was not competent to remand the matter back to the adjudicating authority, and the order under challenge is liable to be set aside on this ground.

2. Entitlement to Interest on the Sanctioned Refund Amount:
The second issue is whether the appellant is entitled to interest on the sanctioned refund amount from the date of deposit. The appellant had deposited Rs. 10,88,180/- even before the issuance of the Show Cause Notice, and this amount was deposited under protest. The refund claim was filed on 23.01.2020, and the refund was sanctioned on 29.07.2020, beyond the period of three months as provided under Section 11B of the Central Excise Act, 1944. Section 11BB of the Act provides for interest on delayed refunds if the refund is not made within three months from the date of receipt of the application. The Tribunal, in the case of Parle Agro Pvt. Ltd. vs. CC CGST Noida, held that interest should be granted from the date of deposit till the date of payment. Similarly, in the case of Marshal Foundary and Engg Pvt Ltd. vs. CGST Faridabad, the Tribunal upheld the entitlement to interest on delayed refunds.

The relevant provision in this context is Section 35FF of the Central Excise Act, 1944, which states that interest on delayed refunds is payable after the expiry of three months from the date of communication of the order of the appellate authority. The Hon’ble Apex Court, in the case of Sandvik Asia Ltd. vs. Commissioner of Income Tax I Pune, held that the assessee is entitled to claim interest from the date of payment of the initial amount till the date of its refund. This decision was followed by the Kerala High Court in the case of Sony Pictures Networks India Pvt. Ltd., which awarded interest at the rate of 12% per annum on delayed refunds.

Given that the appellant deposited the amount in 2014, even before the issuance of the Show Cause Notice, and the demand was later set aside, the deposit was under protest. Therefore, the appellant is entitled to interest at the rate of 12% from the date of deposit of the said amount. Consequently, the second issue is decided in favor of the appellant.

Conclusion:
As a result of the above discussion, the order under challenge is set aside, and the appeal is allowed. The appellant is entitled to interest at the rate of 12% per annum from the date of deposit of the amount until its realization.

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