2022 (10) TMI 426 - AT - Central Excise

Tribunal awards interest on refunded amount citing nature of deposit

M/s. Sona Plastic Udyog Versus Commissioner Central GST & Central Excise Commissionerate, Jaipur

The Tribunal ruled in favor of the appellant, holding that they were entitled to interest on the refunded amount of Rs.15,50,000/- at a rate of 15% per ... Claim of interest on the refund amount of redemption fine - section 11B of Central Excise Act - HELD THAT:- The appellant opted for getting the goods redeemed. After paying Rs.15.5 Lakhs as redemption fine, the appellant had got the goods provisionally released - The amount which was prayed to be refunded is nothing but the interest on the value of the goods, the ownership whereof stands finally confirmed in favour of the present appellants. From no stretch of imagination the same can be called as the amount of duty paid by the appellants. Hence as of now, the said amount is nothing but a deposit made with the Revenue. The issue of refund of such deposit alongwith the interest is no more res integra. The Hon’ble Apex Court also has settled this issue in the case of SANDVIK ASIA LIMITED VERSUS COMMISSIONER OF INCOME-TAX AND OTHERS [2006 (1) TMI 55 - SUPREME COURT] holding the assessee is entitled for interest along with the refund of the amount which he was not liable to pay to the department - the appellant is entitled for the interest upon the amount of Rs.15.5 Lakhs also. Section 11BB of Central Excise Act is opined to be not applicable to the appellant. It is clear that since the order of confiscation of goods has already been set aside the amount of redemption fine as was deposited by the appellant was an amount of revenue deposit with the department - the appellant to be entitled for the interest on the refunded amount of Rs.15.5 Lakhs (the redemption fine) to be paid from the date of its deposit at the rate of 15% per annum. Appeal allowed. Issues Involved:1. Entitlement to interest on the refund of the redemption fine.2. Applicability of Section 11A and Section 11B of the Central Excise Act.3. Determination of the rate of interest on the refunded amount.Detailed Analysis:1. Entitlement to Interest on the Refund of the Redemption Fine:The appellant contested the denial of interest on the refund of Rs.15,50,000/- paid as a redemption fine. The Tribunal noted that the appellant had paid the redemption fine to release confiscated goods, which were later ordered to be refunded without interest. The Tribunal held that the amount paid as a redemption fine was not a duty but a revenue deposit, and thus, the appellant was entitled to interest on this amount. The Tribunal referenced the case of CCE, Nasik vs. Motor Industries Ltd. and M/s. Parle Agro Pvt. Ltd. Vs. Commissioner, GST, which supported the appellant's claim for interest on deposits made during investigations.2. Applicability of Section 11A and Section 11B of the Central Excise Act:The Department argued that under Section 11A (ec), interest on refunds is payable only if the refund claim is not sanctioned within three months from the date of application. The Tribunal observed that Section 11B, which deals with the refund of duty, was not applicable as the amount in question was a revenue deposit, not a duty. The Tribunal cited the Ranbaxy Laboratories Ltd. Vs. Union of India case, clarifying that interest on delayed refunds is payable from the date of the refund application, not from the date of the appellate order.3. Determination of the Rate of Interest on the Refunded Amount:The Tribunal referred to the Sandvik Asia Ltd. case, where the Supreme Court held that interest is payable on amounts wrongfully retained by the revenue. The Tribunal also considered the Sony Pictures Networks India Pvt. Ltd. vs Union of India decision, which set the interest rate at 12% per annum for similar cases. However, the Tribunal noted that the Department's Notification No.68/2003-CE fixed the interest rate at 15% per annum under Section 11DD (interest on amounts collected in excess of duty).Conclusion:The Tribunal concluded that the appellant was entitled to interest on the refunded amount of Rs.15,50,000/- from the date of its deposit at the rate of 15% per annum. The order of the Commissioner (Appeals) was set aside, and the appeal was allowed. The Tribunal emphasized that the amount deposited as a redemption fine was not a duty but a revenue deposit, and thus, the provisions of Section 11B were not applicable. The Tribunal's decision was based on established legal precedents and the specific circumstances of the case.