2025 (1) TMI 1256 - AT - Central Excise

Tribunal denies interest on pre-deposit refund made within statutory three-month period under Section 35FF

M/s Amkap Marketing Pvt. Ltd. Versus Commissioner of Central Excise & CGST, Allahabad

The CESTAT Allahabad dismissed the appellant's claim for interest on a pre-deposit refund. The appellant made a deposit in 2012 under Section 35F of the ... Entitlement to interest on the refund of a pre-deposit amount made in 2012, which was refunded following a favorable appellate decision in 2018 - interpretation and application of Sections 35F and 35FF of the Central Excise Act, 1944, as they existed prior to and after the amendments introduced by the Finance Act, 2014 - HELD THAT:- From the perusal of the section 35F it is evident that the amounts deposited in terms of this section are noting but duty. The use of phrase in this section “pending the appeal, deposit with the adjudicating authority the duty demanded.” Further from the perusal of Section 35 FF it is evident that in case the appeal is finally decided in favour of the appellant hen the amount, so deposited under Section 35 F shall be refunded along with interest for period after expiry of period of three months from the date of communication of order of Appellate Authority at the rates specified as per section 11BB. It is observed that while making the above substitution w.e.f. 06.08.2014 specifically by proviso to Section 35F and Section 35FF, it has been stated that the amount deposited under Section 35F of the Act, prior to commencement of Finance Act, 2014, will be governed by provision of Section 35F as it existed before the commencement. In view of the specific provision made in the Act, the refund claim of the deposit made will have to be considered in terms of Section 35FF as it existed on the date of deposit and the interest will be paid at the rate specified in Section 11BB after expiry of three months from the date of communication of the order of the Appellate Authority till the date. Reliance placed on the decision of the Hon’ble Supreme Court in the case of Sandvik Asia [2006 (1) TMI 55 - SUPREME COURT]. Interpreting the above decision of Hon’ble Supreme various benches of tribunal have concluded in the favour of the grant of interest form the date of deposit and at the rate of 12% (though not provided by the statute or any Notification issued in terms of Section 11BB or Section 35FF of the Central Excise Act, 1944). However it may also be noted that these decisions were in respect of the deposits made when there was no separate provision for refund of deposits along with interest. In that situation courts and tribunals were allowing interest from the date of deposit till the date of refund and were also prescribing the rate of interest as deemed fit. Conclusion - The appellant was not entitled to interest on the refunded amount as the refund was made within the statutory period, and the applicable legal provisions did not support the appellant's claim for interest from the date of deposit. Appeal dismissed. ISSUES PRESENTED and CONSIDEREDThe core legal question considered in this judgment is whether the appellant is entitled to interest on the refund of a pre-deposit amount made in 2012, which was refunded following a favorable appellate decision in 2018. The determination hinges on the interpretation and application of Sections 35F and 35FF of the Central Excise Act, 1944, as they existed prior to and after the amendments introduced by the Finance Act, 2014.ISSUE-WISE DETAILED ANALYSISRelevant Legal Framework and PrecedentsThe legal framework revolves around Sections 35F and 35FF of the Central Excise Act, 1944. Section 35F pertains to the deposit of duty or penalty pending an appeal, while Section 35FF addresses the interest on delayed refunds of such deposits. The provisions were amended by the Finance Act, 2014, which introduced a new regime for deposits and refunds, including interest on delayed refunds.The appellant cited several precedents to support their claim for interest from the date of deposit, including decisions from various CESTAT benches and circulars issued by the Central Board of Excise and Customs.Court's Interpretation and ReasoningThe Tribunal analyzed the provisions of Sections 35F and 35FF as they existed before and after the 2014 amendments. It noted that the pre-deposit made in 2012 was governed by the provisions as they stood before the amendments. The Tribunal emphasized that the proviso to Section 35FF, as amended, explicitly states that deposits made prior to the commencement of the Finance Act, 2014, would continue to be governed by the old provisions.The Tribunal also considered the interpretation of similar provisions in other statutes, such as Section 129EE of the Customs Act, and the judicial precedents interpreting these provisions.Key Evidence and FindingsThe Tribunal found that the refund was processed within three months from the date of communication of the appellate order, which is the critical timeframe under the pre-amended Section 35FF for the accrual of interest. Therefore, no interest was due to the appellant under the statutory provisions applicable at the time of deposit.Application of Law to FactsThe Tribunal applied the pre-amended Section 35FF to the facts of the case, concluding that the appellant was not entitled to interest because the refund was made within the stipulated three-month period from the date of the appellate order's communication.Treatment of Competing ArgumentsThe appellant's argument for interest from the date of deposit was primarily based on judicial precedents and circulars that suggested a broader interpretation of interest entitlement. However, the Tribunal found these arguments unpersuasive in light of the clear statutory language and the specific provisions applicable to deposits made before the 2014 amendments.ConclusionsThe Tribunal concluded that the appellant was not entitled to interest on the refunded pre-deposit amount because the refund was processed within the statutory period outlined in the applicable provisions of the Central Excise Act, 1944, as they stood prior to the 2014 amendments.SIGNIFICANT HOLDINGSCore Principles EstablishedThe Tribunal reaffirmed the principle that statutory provisions governing interest on refunds must be applied as they existed at the time of the deposit, particularly when specific amendments clarify the applicability of old provisions to pre-existing deposits.Final Determinations on Each IssueThe Tribunal dismissed the appeal, holding that the appellant was not entitled to interest on the refunded amount as the refund was made within the statutory period, and the applicable legal provisions did not support the appellant's claim for interest from the date of deposit.