2024 (9) TMI 112 - AT - Central Excise

Tribunal rules statutory interest on refund under Section 35FF mandatory and automatic regardless of assessee's claim

M/s India Yamaha Motor Pvt. Ltd. Versus Commissioner of Central Goods & Services Tax, Greater Noida

CESTAT Allahabad allowed the appeal regarding statutory interest on refund under Section 35FF of Central Excise Act, 1944. The tribunal held that interest ... Claim for statutory interest on refund granted in terms of Section 35FF of the Central Excise Act, 1944 - HELD THAT:- A bare perusal of Section 35FF mandates that when the Appellant is refunded the amount of pre-deposit earlier paid in terms of Section 35F consequent upon the order from the Appellate Authority, interest shall also be paid to the Appellant from the date of payment of pre-deposit amount till the refund of such amount. Thus, the payment of interest along with refund under Section 35FF of the Excise Act, is not dependent on whether the same has been claimed by the Assessee or not. The same is axiomatic. In the present case, once the Ld. Adjudicating Authority committed a legal error in not granting interest on refund of pre-deposit while passing the Order-in-Original and appeal against the Order-in-Original is filed, then the Ld. Appellate Authority is bound to correct the error. The finding given by the Ld. Commissioner (Appeals) in the impugned order that question of interest does not arise at this stage, is not legally sustainable. In the case of M/S CADILA PHARMACEUTICALS LTD VERSUS COMMISSIONER OF SERVICE TAX-SERVICE TAX - AHMEDABAD [2018 (1) TMI 424 - CESTAT AHMEDABAD], the Tribunal categorically held that Section 35FF itself provides for payment of interest on refund of pre-deposit amount and the same does not differentiate between the payment of pre-deposit made in cash or by debit in the Cenvat credit account. Thus, merely because Section 35F restricts the pre-deposit amount as Rs.10 crore, does not mean that Assessee will not be entitled for interest on refund of pre-deposit amount under Section 35FF even if it paid the pre-deposit amount more than Rs.10 crore. The interest has to be paid to the Appellant as per Section 35FF of the Central Excise Act, 1944. The impugned order is set aside - appeal allowed. Issues:- Refund of pre-deposit without statutory interest under Section 35FF of the Central Excise Act, 1944.Detailed Analysis:The Appellant, a manufacturer of motor cycles, scooters, parts, and accessories, filed an appeal against an Order-in-Original and made a pre-deposit. The appeal was allowed with benefits, and the Appellant applied for a refund. The Assistant Commissioner allowed the refund but did not grant statutory interest as per Section 35FF. The Commissioner (Appeals) held that the issue of interest was not part of the original proceedings and directed the Appellant to approach the Adjudicating Authority. The Appellant contended that interest on the refund of the pre-deposit is mandatory under Section 35FF and cited relevant case laws to support their claim. The Departmental Authorized Representative supported the impugned order, arguing against the Appellant's claim for interest.The Tribunal analyzed Section 35FF, which mandates the payment of interest on the refund of pre-deposit from the date of payment till the refund. The Tribunal emphasized that the payment of interest is not discretionary but mandatory under the provision. Even if the interest is not claimed specifically, the Adjudicatory Authority is legally bound to grant interest on the refunded amount. The Tribunal referred to a case law where it was held that denial of interest under Section 35FF is unsustainable. The Tribunal concluded that the Appellant is entitled to interest on the refund of the pre-deposit amount, irrespective of the amount exceeding Rs.10 crore. The Department's acceptance of the pre-deposit amount without objection implies the obligation to pay interest upon refund. Therefore, the impugned order was set aside, and the appeal was allowed with consequential relief.In summary, the Tribunal ruled in favor of the Appellant, holding that interest must be paid as per Section 35FF of the Central Excise Act, 1944. The decision emphasized the mandatory nature of interest payment on the refund of pre-deposit amounts, irrespective of the amount exceeding Rs.10 crore. The Tribunal's analysis highlighted the legal obligation to pay interest as per the statutory provision, rejecting the Department's argument against granting interest.