Extinguished tax demand under insolvency cannot justify retention of excise pre-deposit; refund with statutory interest follows.

Where a tax demand is extinguished on approval of a resolution plan under the Insolvency and Bankruptcy Code, the Revenue cannot continue to retain an appellate pre-deposit made against that demand. The note states that claims not included in the approved plan stand extinguished, and failure by the Revenue to lodge its claim in insolvency proceedings or challenge the insolvency orders leaves no basis to reject refund. It further notes that retention of the pre-deposit after the underlying liability has ceased amounts to unjust enrichment, and the depositor is entitled to refund with statutory interest under the governing excise framework.

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Issues: (i) Whether the rejection of refund of the pre-deposit amount was sustainable after the tax dues stood extinguished under the approved resolution plan under the Insolvency and Bankruptcy Code, 2016. (ii) Whether the petitioner was entitled to refund of the pre-deposit amount along with statutory interest under the Central Excise Act, 1944.

Issue (i): Whether the rejection of refund of the pre-deposit amount was sustainable after the tax dues stood extinguished under the approved resolution plan under the Insolvency and Bankruptcy Code, 2016.

Analysis: Once the resolution plan was approved, claims not forming part of the plan stood extinguished, including statutory dues of the Revenue for the relevant period. The Revenue had not lodged its claim in the insolvency process and had not challenged the NCLT orders. The rejection order proceeded on an incorrect understanding of the effect of the insolvency orders, because the extinguishment operated against the Revenue's demand and did not bar refund of the petitioner's pre-deposit.

Conclusion: The rejection of the refund claim was unsustainable and was rightly set aside.

Issue (ii): Whether the petitioner was entitled to refund of the pre-deposit amount along with statutory interest under the Central Excise Act, 1944.

Analysis: The pre-deposit was made for prosecuting the excise appeals under the appellate scheme, and once the underlying liability no longer survived, retention of the amount by the Revenue would amount to unjust enrichment. The provision governing pre-deposit carries the incident of interest on delayed refund, and the circular relied on by the Revenue was held inapplicable to the facts.

Conclusion: The petitioner was entitled to refund of the pre-deposit amount together with applicable statutory interest.

Final Conclusion: The writ petition succeeded, the impugned refund rejection was quashed, and the Revenue was directed to return the pre-deposit with interest within the stipulated time.

Ratio Decidendi: Where a tax demand has been extinguished upon approval of a resolution plan under the Insolvency and Bankruptcy Code, the Revenue cannot retain the appellate pre-deposit taken for that demand, and the depositor is entitled to refund with statutory interest under the governing excise provisions.

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