Interest on duty refund denied where refund was sanctioned within time and show-cause payment was treated as duty, not pre-deposit.

Interest on duty refund is payable only when the refund is not sanctioned within the prescribed three-month period from the refund application. Where the refund followed an order allowing Cenvat credit and was granted within that statutory timeframe, no interest accrued. Amounts paid during audit objection or show-cause proceedings were treated as duty payments, not as pre-deposits, so they did not alter the interest claim. The relevant entitlement to refund arose from the appellate order, but because refund sanction was timely, the assessee's claim for interest failed.

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Issues: Whether interest was payable on the refunded amount when the refund was sanctioned within three months of the refund application, and whether the amount paid during show-cause proceedings could be treated as a pre-deposit.

Analysis: The refund arose after the order allowing the Cenvat credit and was sanctioned within the statutory period. The applicable principle for interest on refund is that interest becomes payable only on delay beyond three months from the date of filing the refund application. The amount paid pursuant to the audit objection and show-cause proceedings was treated as duty payment and not as a pre-deposit. The relevant date for refund was therefore linked to the appellate order that created the entitlement to refund, and there was no delay in sanction of refund beyond the prescribed period.

Conclusion: Interest on the refund was not payable, and the assessee's claim was rejected.

Final Conclusion: The dismissal of the appeal left undisturbed the finding that no interest accrued on the refunded amount, because the refund was granted within the statutory time frame and the prior payment was not a pre-deposit.

Ratio Decidendi: Interest on refund of duty is payable only when the refund is not sanctioned within the prescribed period, and a payment made during show-cause proceedings as duty cannot be treated as a pre-deposit for claiming interest.

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