Appellant entitled to 12% interest under Section 11BB on refunded pre-deposit amount, denial violates property rights

CESTAT New Delhi held that appellant was entitled to interest under Section 11BB of Central Excise Act, 1944 on refunded pre-deposit amount. The tribunal set aside lower authority's denial of interest, ruling that refund provisions of Section 11B and 11BB were not applicable to the amount in question. Citing Article 300A of Constitution and SC precedent, CESTAT determined appellant entitled to 12% per annum interest from deposit date until refund date, as denial would constitute unjust deprivation of property rights. Appeal allowed.

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Issues Involved:
1. Calculation of interest on refund.
2. Applicable rate of interest.
3. Entitlement to interest on interest.

Issue-wise Detailed Analysis:

1. Calculation of Interest on Refund:
The appellant, M/s. Modern Threads India Limited, filed a refund claim of Rs. 51,26,639/- on 17.11.2020, later adjusted to Rs. 51,17,454/-. The claim was pursuant to orders from the Rajasthan High Court and other authorities. However, the refund was proposed to be rejected as time-barred, alleging it should have been filed within one year from the High Court's order dated 09.05.2018. Initially rejected, the matter was remanded by the Commissioner (Appeals) for reconsideration. The adjudicating authority sanctioned the refund, holding that the clause of unjust enrichment was not applicable.

2. Applicable Rate of Interest:
The appellant contended that interest on the refund should be calculated from the date of the Tribunal’s final order and at a rate of 12% per annum. The Tribunal referred to multiple precedents, including the cases of Bochasanwasi Shri Aksharpurushottam Swaminarayan Sansth and Parle Agro Pvt. Ltd., which supported the appellant's claim. The Tribunal noted that the rate of interest varies between 6% to 18% as per different notifications under the Central Excise Act. The Tribunal decided that 12% per annum was appropriate, drawing support from several judgments, including those of the Supreme Court and High Courts.

3. Entitlement to Interest on Interest:
The Tribunal held that the appellant was entitled to interest on the refund amount from the date of deposit until the date of payment. This was based on the principle that no person should be deprived of their property without authority of law, as per Article 300A of the Constitution of India. The Tribunal cited the Supreme Court's decision in Sandvik Asia Ltd., which established that interest on delayed refunds should be compensated. The Tribunal also referenced other cases, such as RHL Profiles Ltd. and Union of India vs. M P Desal, which supported the payment of interest on retained amounts.

Conclusion:
The Tribunal concluded that the appellant was entitled to interest on the refund amount at a rate of 12% per annum from the date of deposit until the date of refund. The order under challenge was set aside, and the appeal was allowed, affirming the appellant's right to interest on the refunded amount. The decision emphasized the need for fair compensation for the delay in refunding the appellant's money, aligning with established legal principles and precedents.

[Order pronounced in the open court on 28.06.2024]

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