Pre-deposit refunds under Section 35FF entitled to interest from deposit date until payment following statutory provisions

CESTAT Hyderabad held that pre-deposit refunds under Section 35FF of Central Excise Act, 1944 are entitled to interest from deposit date until refund payment date, following 2014 Finance Act amendments. The tribunal ruled that interest rates must follow statutory provisions rather than arbitrary tribunal determination, citing SC precedent. The appellants were granted interest on pre-deposit refunds at statutorily prescribed rates under Section 35FF provisions. Appeal allowed.

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Issues Involved:
1. Entitlement to Interest on Pre-Deposit Refund
2. Applicable Rate of Interest

Summary:

1. Entitlement to Interest on Pre-Deposit Refund:
The primary issue in this case is whether the appellants are entitled to interest on the pre-deposit paid under Section 35FF of the Central Excise Act, 1944, or under the provisions of Section 11B. The appellants argued that the refund order did not specify any interest to be paid when the refund was sanctioned following the Tribunal's order. They contended that the impugned refund is not of duty and thus governed by Section 35FF, which mandates interest from the date of pre-deposit till the date of refund. The Tribunal found that Section 35FF, as amended by the Finance Act, 2014, clearly states that interest will be paid on the pre-deposit from the date of such pre-deposit till the date of payment of refund.

2. Applicable Rate of Interest:
The appellants sought interest at the rate of 12%, citing various judgments. However, the respondent argued that the rate of interest should be as provided in the statute and not arbitrary. The Tribunal noted that several provisions of the Central Excise Act and related notifications set the rate of interest between 6% to 18%. It concluded that while the grant of interest on the refund of pre-deposit is consequential, the rate of interest cannot be arbitrarily fixed by the Tribunal. The rate of interest is governed by statutory provisions and notifications issued from time to time. The Tribunal held that the appellants are entitled to interest as per Section 35FF at the rate prescribed therein.

Conclusion:
The appeal was allowed, with the Tribunal ruling that the appellants are entitled to interest on the pre-deposit refund as per Section 35FF of the Central Excise Act, 1944, at the rate prescribed by statutory provisions and relevant notifications.

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