2001 (1) TMI 102 - HC - Central Excise

Pre-deposit u/s35F: whether refundable as 'duty' u/s11B, with 15% interest for delayed return ordered

A dispute arose whether an amount deposited as a pre-deposit under s.35F of the Central Excise Act was governed by the refund regime under s.11B as ... Refund of pre-deposit under Section 35-F - registered company - value of certain computers - HELD THAT:- Department, strenuously urged that the case of the Petitioner falls within Section 11-B of the Act and must be governed by the parameters applicable to the claim for refund of duty. In this regard he drew our attention to Section 35-F of the Act and contended that the amount which is liable to be deposited under Section 35-F is towards the order for duty and/or penalty and has the character of duty itself. This contention is no longer res Integra, atleast as far as this Court is concerned. In our judgment, a deposit made under Section 35-F of the Act is liable to be adjusted towards the claim for duty, in case the Appeal fails and it needs to be returned to the Appellant, in case the Appeal succeeds, whether fully or partly. In any event, looking at the facts and circumstances of the present case, it appears to us that the Respondents were wrong throughout. They proceeded to demand duty from the Petitioner in a clearly time barred case and because the Department took a wrong view of the matter; we see no reason why the Petitioner should be made to suffer loss of interest on the large amount of Rupees Twenty lakhs for a period of almost three years and more. The CEGAT's order dated 24th January, 1997 remands the matter for re-adjudication by the adjudicating authority. In other words, the parties were put back to the situation of a show cause notice against the Petitioner being adjudicated by the authority. If these are the circumstances, then we see no reason how the Respondents were entitled to hold on to the money merely because the adjudication was proceeding on the original show cause notice, that too on demands which were hopelessly time barred, as subsequently pointed out by the Supreme Court. Thus, we are of the view that the Petitioner is entitled to interest at the rate of fifteen per cent per annum on Rupees Twenty lakhs between 24th January, 1997 to 15th September, 2000. Issues involved: Dispute over refund of pre-deposit amount under Section 35-F of the Central Excise Act, 1944.Judgment Summary:1. The petitioner, a registered company, had a dispute with Central Excise authorities regarding the value of certain goods. The matter was resolved by the Supreme Court in favor of the petitioner, who sought a refund of the pre-deposit amount of Rupees Twenty lakhs made under Section 35-F of the Act.2. The Department contended that the case fell under Section 11-B of the Act, but the Court disagreed, stating that the amount deposited under Section 35-F was a security deposit and not duty itself. As there were no specific statutory provisions governing the issue, the matter was to be decided based on basic principles.3. The Court held that the amount should have been returned to the petitioner when the appeal was disposed of, as the deposit under Section 35-F is to be adjusted towards duty if the appeal fails, or returned if the appeal succeeds. The Department's actions were deemed unjustified, and the petitioner was entitled to interest on the withheld amount.4. The Department's argument that the petitioner remained liable for duty was rejected, as the matter was remanded for re-adjudication, and there was no provision requiring a deposit at that stage. The Court ruled in favor of the petitioner, awarding simple interest at the rate of fifteen per cent per annum on the amount from January 24, 1997, to September 15, 2000.5. The writ petition was allowed, directing the respondents to pay the specified interest amount. The rule was made absolute, with no order as to costs, and parties were instructed to act on an authenticated copy of the order. The issuance of a certified copy was expedited.