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

CESTAT Allahabad allowed the appeal regarding statutory interest on refund under Section 35FF of Central Excise Act, 1944. The tribunal held that interest payment on pre-deposit refund is mandatory and automatic, not dependent on assessee's claim. The adjudicating authority's failure to grant interest was a legal error that appellate authority must correct. The tribunal relied on precedent establishing that Section 35FF mandates interest payment regardless of whether pre-deposit was made in cash or through Cenvat credit, and irrespective of the Rs.10 crore limit under Section 35F. The impugned order was set aside.

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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.

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