Section 35F allows interest on refund of pre-deposit when unjust enrichment doesn't apply to non-duty matters

CESTAT New Delhi allowed the appeal regarding interest on refund of pre-deposit under Section 35F of Finance Act. The Commissioner (Appeals) wrongly relied on pre-amended Section 35FF to deny interest entitlement. Following SC precedent in Finacord Chemicals case, the tribunal held that refund matters other than duty amount are not covered under Section 11B of Customs Act or Section 35FF of Central Excise Act, and unjust enrichment concept is inapplicable. The appellant was granted interest at 12% rate from deposit date to payment date.

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Issues Involved:
1. Entitlement to interest on the amount of pre-deposit refunded.
2. Applicability of amended Section 35FF of the Finance Act.
3. Rate of interest applicable on the refunded amount.

Summary:

1. Entitlement to Interest on Pre-deposit:
The appellant, M/s. Kumawat Contractors, contested the denial of interest on the refunded pre-deposit amount of Rs. 8,00,000/-. The Tribunal observed that the amount in question was a mandatory pre-deposit made while filing an appeal before the Commissioner (Appeals) under Section 35F of the Finance Act. The refund of this amount was sanctioned without interest, which was subsequently challenged.

2. Applicability of Amended Section 35FF:
The Tribunal examined the applicability of Section 35FF, both pre and post-amendment. It was noted that the refund application was filed in 2020, making the amended Section 35FF relevant. The Tribunal referred to the decision in M/s. Riba Textile Ltd., which emphasized that the date of the refund application is crucial for determining the applicable provisions. The Tribunal held that the Commissioner (Appeals) wrongly relied on the pre-amended Section 35FF and that the appellant was entitled to interest under the amended provisions.

3. Rate of Interest:
The Tribunal addressed the rate of interest applicable on the refunded amount. The appellant cited various decisions advocating for a 12% interest rate. The Tribunal referred to the Supreme Court's decision in Commissioner of Customs (Import), Raigad vs. M/s. Finacord Chemicals (P) Ltd., which supported the entitlement to interest on refunds not covered under Section 11B of the Customs Act. The Tribunal concluded that the appellant was entitled to interest at the rate of 12% from the date of deposit till the date of refund, dismissing the department's reliance on a lower interest rate as per a recent High Court decision.

Conclusion:
The appeal was allowed, and the appellant was held entitled to interest at the rate of 12% on the refunded pre-deposit amount from the date of deposit to the date of payment. The Tribunal emphasized adherence to the amended Section 35FF and relevant judicial precedents.

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