Pre-deposit refund with interest follows when an appeal succeeds and the original excise order is set aside

A pre-deposit made under Section 35F of the Central Excise Act is not payment of duty but a deposit to secure the right of appeal. When the appellate order allows the appeal and sets aside the original adjudication, the deposit becomes refundable even if the matter is remanded for de novo consideration. The refund claim is not controlled by Section 11B in that situation, so the departmental objection based on that provision fails. The remaining issue was the rate and payment of interest, which had to be worked out under the applicable circular, and interest on the pre-deposit was held payable.

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Issues: Whether the assessee was entitled to interest on the pre-deposit made under Section 35F of the Central Excise Act after the appeal before the Tribunal was allowed and the matter was remanded for de novo consideration.

Analysis: A pre-deposit under Section 35F is not a payment of duty but a deposit made to avail the right of appeal. Once the appellate order sets aside the original adjudication and the appeal is allowed, the deposit becomes refundable notwithstanding that the matter is remanded for further adjudication. The refund claim is not governed by Section 11B in such a situation, and the departmental objection based on that provision could not stand. In light of the Supreme Court's ruling that pre-deposit is refundable with interest on the assessee succeeding, the only surviving question was the rate and payment of interest in terms of the applicable circular.

Conclusion: The assessee was entitled to interest on the pre-deposit, and the respondents were directed to pass orders for payment of interest in accordance with the relevant circular.

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