Refund of disputed deposits: interest is linked to the date of deposit, not the refund application, under the cited framework.

Amounts deposited during adjudication or investigation are treated as disputed deposits, not payment of duty or service tax, so refund of such sums is not governed by Section 11B and the statutory interest mechanism under Section 11BB of the Central Excise Act, 1944. The note states that interest claims on such deposits should be assessed by reference to the deposit character of the payment, with interest running from the date the deposit was made rather than from three months after a refund application. It also refers to the transitional refund framework under Section 142 of the CGST Act, 2017 as supporting this approach.

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Issues: (i) Whether interest on the refunded amount was payable at 12% or at the rate applicable under Section 11BB; (ii) Whether interest was payable from the date of deposit or only after three months from the date of filing the refund claim.

Issue (i): Whether interest on the refunded amount was payable at 12% or at the rate applicable under Section 11BB.

Analysis: The amount paid by the appellant was held to be a deposit made during the dispute and not payment of service tax or duty. Once the amount is treated as a deposit, the refund does not attract Section 11B of the Central Excise Act, 1944, and the statutory interest rate under Section 11BB of the Central Excise Act, 1944 does not govern the claim. The claim for interest was therefore examined on the basis of the deposit character of the payment and the earlier view accepting interest at 12%.

Conclusion: Interest was held payable at 12% in favour of the assessee.

Issue (ii): Whether interest was payable from the date of deposit or only after three months from the date of filing the refund claim.

Analysis: Since the amount was found to be a deposit and not a tax payment, the relevant entitlement to interest was linked to the date on which the deposit was made. Reliance was placed on the principle that interest follows retention of a refundable deposit from the time it is made, rather than from the date of the refund application. The transitional refund framework under Section 142 of the Central Goods and Services Tax Act, 2017 was also referred to in support of this approach.

Conclusion: Interest was held payable from the date of deposit, i.e. 19.01.2011, till realization, in favour of the assessee.

Final Conclusion: The refund amount was treated as a disputed deposit, carrying interest at 12% from the date of deposit until payment.

Ratio Decidendi: Amounts deposited during adjudication or investigation are deposits and not tax payments, so the refund of such amounts is not governed by the statutory refund and interest provisions applicable to duty or tax.

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