Refund of duty paid under protest: interest runs from the appellate order, at the notified statutory rate only.

Amounts paid under protest against an audit objection retain the character of duty for refund purposes and are governed by sections 11B and 11BB of the Central Excise Act, 1944, rather than being treated as a mere statutory deposit. Where the refund becomes payable because of an appellate order, the relevant date for interest is that appellate order, and interest runs only after three months from that date. Section 11BB also fixes interest at the notified statutory rate, so a higher compensatory rate cannot be substituted in the absence of a legal basis. The refund order was therefore modified only to adjust the starting point for interest, while the notified rate was maintained.

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Issues: (i) Whether amounts paid under protest against an audit objection were to be treated as duty or as a mere deposit for the purpose of refund and interest; (ii) what was the relevant date for computing interest on the delayed refund; (iii) whether a higher rate of interest than that notified under section 11BB of the Central Excise Act, 1944 could be granted.

Issue (i): Whether amounts paid under protest against an audit objection were to be treated as duty or as a mere deposit for the purpose of refund and interest.

Analysis: The payment was made in response to a quantified audit objection and under the excise accounting heads, with protest procedure recognised in the statutory scheme. The statutory framework and the refund provisions under section 11B governed claims for refund of such amounts. The law did not permit treating the amount as an statutory deposit merely because it was paid under protest; the payment retained the character of duty for refund purposes.

Conclusion: The amount was treated as duty and not as a mere deposit, and refund interest had to be examined within the framework of sections 11B and 11BB.

Issue (ii): What was the relevant date for computing interest on the delayed refund.

Analysis: The claim filed in 2017 was incomplete until unjust enrichment material was furnished, but the refund ultimately became payable as a consequence of the appellate order dated 23.08.2018. In such a case, the explanation to section 11B and the explanation to section 11BB operate so that the relevant date is linked to the appellate order, not to the later show-cause notice issued during processing of the refund. The period for interest therefore runs after the expiry of three months from the appellate order.

Conclusion: The relevant date for interest computation was held to be 23.08.2018, and interest became payable after the expiry of three months therefrom.

Issue (iii): Whether a higher rate of interest than that notified under section 11BB of the Central Excise Act, 1944 could be granted.

Analysis: Section 11BB fixes interest on delayed refund at the rate notified by the Central Government within the statutory band. The Tribunal declined to import a compensation-based higher rate from decisions dealing with different factual and statutory contexts. The governing notification under section 11BB was held to be binding, and the Tribunal found no basis to enhance the rate to 12%.

Conclusion: The appellant was held entitled only to interest at the notified rate under section 11BB, not at 12%.

Final Conclusion: The impugned order was modified to the limited extent of shifting the starting point for interest to three months after the appellate order, while maintaining the statutory notified rate of interest on the delayed refund.

Ratio Decidendi: Refund of duty paid under protest against an audit objection remains governed by sections 11B and 11BB of the Central Excise Act, 1944, and where refund arises from an appellate order, the relevant date for interest is the appellate order itself, with interest payable only at the rate notified under section 11BB.

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