Tribunal rules no interest on delayed refund under unamended provisions, rejects higher rate claim

The Tribunal held that the unamended provisions of Section 35FF applied, and since the refund was made within three months, no interest was payable on the delayed refund of the pre-deposit amount. The Tribunal set aside the Commissioner's order directing payment of interest under the amended provisions, rejecting the respondent's cross-objection for a higher interest rate. The Department's appeal was allowed.

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Issues Involved:
1. Applicability of unamended vs. amended provisions of Section 35FF for payment of interest on pre-deposit refund.
2. Entitlement to interest on the delayed refund of the pre-deposit amount.
3. Rate of interest applicable on delayed refund.

Issue-wise Detailed Analysis:

1. Applicability of unamended vs. amended provisions of Section 35FF for payment of interest on pre-deposit refund:
The core issue revolves around whether the unamended or amended provisions of Section 35FF should apply for the payment of interest on the pre-deposit amount refunded to the respondent. The Tribunal noted that the respondent had filed an appeal before the Tribunal on 05.08.2013, with the pre-deposit amount being determined by an order dated 11.05.2016. The Delhi High Court later modified this order, directing the respondent to deposit an amount equal to 7.5% of the total demand, which was deposited on 28.11.2016. The Tribunal clarified that the unamended provisions of Section 35F were applicable since the appeal and stay application were pending before 06.08.2014. The Tribunal emphasized that the amended Section 35F, which mandates a 7.5% deposit, does not apply to appeals and stay applications pending before the commencement of the Finance Act No. 2 of 2014.

2. Entitlement to interest on the delayed refund of the pre-deposit amount:
The Tribunal examined whether the respondent was entitled to interest on the delayed refund of the pre-deposit amount under the unamended Section 35FF. The Tribunal noted that under the unamended Section 35FF, interest was payable if the refund was not issued within three months from the date of communication of the order to the adjudicating authority. Since the refund was made within three months, the respondent was not entitled to any interest under the unamended Section 35FF. The Tribunal also clarified that the Delhi High Court's order did not imply that the amended provisions of Section 35FF would apply, but merely modified the pre-deposit amount to 7.5% of the total demand.

3. Rate of interest applicable on delayed refund:
The Tribunal addressed the respondent's cross-objection seeking a higher rate of interest at 12% per annum. Given the conclusion that the unamended provisions of Section 35FF applied and no interest was payable as the refund was made within the stipulated three months, the Tribunal rejected the cross-objection. The Tribunal also noted that the decisions cited by the respondent, including those from the Allahabad High Court and the Tribunal in other cases, were not applicable since the statutory provisions governed the payment of interest in this case.

Conclusion:
The Tribunal set aside the order dated 05.02.2020 passed by the Commissioner (Appeals), which had directed the payment of interest under the amended provisions of Section 35FF. The Tribunal concluded that the unamended provisions of Section 35FF applied, and since the refund was made within three months, no interest was payable. The cross-objections filed by the respondent seeking a higher rate of interest were also rejected. The appeal filed by the Department was allowed.

Order Pronounced on 02.09.2022.

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