2025 (9) TMI 189 - AT - Central Excise

Appeal allowed: order to pay 12% interest on pre-06.08.2014 'under protest' deposits from three months after refund claim

CESTAT KOLKATA - AT allowed the appeal and directed payment of interest at 12% p.a. on amounts deposited 'under protest' prior to 06.08.2014, calculated ... Grant of interest for the amount deposited “under protest”, made before 06.8.2014 - relevant date for calculation of interest - HELD THAT:- Similar issue came to be decided by Kolkata Tribunal in the case of Z Konark Vs CCGST-BBSR [2025 (1) TMI 479 - CESTAT KOLKATA]. The Tribunal held that 'The interest is required to be paid from three months from the date of the initial filing of the refund claim till the date of granting the refund.' Thus, the appellant would be eligible for interest of 12% per annum from 12/1/2010 till the date on which the refund was granted by the Revenue. Appeal allowed. ISSUES PRESENTED AND CONSIDERED 1. Whether an amount paid 'under protest' prior to 06.08.2014 (not as a statutory pre-deposit under amended provisions) is eligible for interest on refund. 2. If interest is payable, the date from which interest is to be reckoned (date of filing refund claim, date of deposit, date of appellate order, or expiry of three months from any of these). 3. The appropriate rate of interest to be applied on such refunds. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Entitlement to interest where amount was paid 'under protest' (pre-06.08.2014) Legal framework: The relevant statutory scheme governing interest on delayed refunds in the context of central excise/refund jurisprudence is the provision dealing with interest on delayed refunds (Section 11BB of the Central Excise Act in the authorities considered), alongside later statutory provisions concerning pre-deposits (as referred to by the Revenue) which were amended with effect from 06.08.2014. Precedent Treatment: The Tribunal followed the line of authoritative decisions which have held that amounts deposited during investigation/adjudication or paid under protest and later found refundable attract interest - even where such deposits were made prior to the 06.08.2014 amendments - citing decisions that applied principles in landmark Supreme Court authority concerning commencement of interest and subsequent Tribunal benches awarding interest on involuntary or protest deposits. Interpretation and reasoning: The Court distinguished the Revenue's contention that statutory interest provisions for pre-deposits (post-06.08.2014) do not apply to deposits made earlier. Emphasis was placed on the nature of the payment - here, a payment 'under protest' - and on settled authorities that treat involuntary or protest deposits which are ultimately held refundable as entitled to interest. The Court relied on the premise that where an amount paid under protest is ultimately found refundable, the revenue's liability to pay interest follows established refund/interest jurisprudence rather than being negated by the temporal fact of the deposit preceding statutory amendments. Ratio vs. Obiter: Ratio - where an amount is paid under protest and later held refundable, the payor is entitled to interest on that refundable amount despite the payment having been made before the statutory amendments relating to pre-deposit; Obiter - side observations about distinctions with statutory pre-deposit provisions not strictly determinative of entitlement. Conclusion: The appellant is entitled to interest on the amount paid under protest which was later sanctioned for refund. Issue 2 - Date from which interest is to be reckoned Legal framework: The decision principally relies upon the interpretive construction of the statute setting out interest on delayed refunds - specifically that interest accrues where a refund is not paid within three months from receipt of the refund application - and on the Explanation/Proviso which deems appellate/court orders to be orders under the refund provision for certain purposes. Precedent Treatment: The Court followed the Supreme Court's ruling that the liability to pay interest under the refund provision commences from the expiry of three months from the date of receipt of the refund application (and not from the date of the order sanctioning refund), and subsequent Tribunal decisions applying that principle to protest/pre-deposit refunds (including decisions holding that where an appellate authority allows refund, the entitlement relates back to the original claim filing date). The Tribunal also cited decisions holding that communications forwarding appellate orders do not constitute fresh claims and that the original application date governs reckoning. Interpretation and reasoning: Applying the established rule, the Court treated the refund claim date and the date of deposit as the relevant temporal anchors. Where the refund claim was filed and an amount was deposited under protest on a specified earlier date, the interest calculation base is the filing/deposit timeline - interest is payable from the date when interest becomes payable under the refund provision (i.e., after the three-month period from filing) and, as applied in precedent, where deposit is made under protest and refund is later allowed, interest is to be computed from the deposit date (or the date from which interest becomes due considering the three-month rule), continuing until actual refund. Ratio vs. Obiter: Ratio - interest on sanctioned refunds accrues from the date determined by reference to the refund application/deposit timeline (specifically from expiry of three months after filing of refund application or effectively from the deposit date as applied in protest/pre-deposit contexts), and not from the date of the appellate/refunding order; Obiter - detailed textual commentary on the Explanation/Proviso as not postponing the commencement date for interest. Conclusion: Interest is payable from the relevant refund-claim/deposit date - in the present facts, from 12/01/2010 (the date of deposit under protest) until the date of actual refund, with the statutory three-month rule governing commencement applied as per precedent. Issue 3 - Rate of interest applicable to such refunds Legal framework: Statutory interest provisions provide for a notified rate (within a specified range). In the absence of a directly applicable single rate for protest/pre-deposit refunds in the contested period, tribunals have turned to comparative authorities and principles applied in related refund contexts to determine an appropriate rate. Precedent Treatment: The Tribunal adopted the approach of earlier benches which have awarded interest at 12% per annum on refunds of amounts deposited during investigation or under protest. Those decisions relied upon higher court rulings and intermediate authorities (including a Supreme Court precedent cited for guidance on appropriate compensation rates in analogous contexts) and held that 12% is an appropriate and consistent rate in such refund scenarios. The Tribunal expressly followed those decisions as persuasive and controlling in the circumstances. Interpretation and reasoning: Having found entitlement and the proper commencement date, the Tribunal examined prior orders where 12% per annum was awarded for similar categories of refunds (involuntary deposits/stay deposits/pre-deposits during investigation) and concluded that a 12% rate is appropriate and in consonance with the range of rates notified under various refund-related provisions. The Tribunal treated the 12% figure as a balanced rate used consistently by benches in comparable factual and legal situations. Ratio vs. Obiter: Ratio - the appellant is entitled to interest at the rate of 12% per annum on the refundable amount from the relevant commencement date until actual refund; Obiter - discussion of the spectrum of statutory rates and comparative case-law rationale supporting the 12% figure. Conclusion: Interest shall be granted at 12% per annum on the refunded amount, computed from 12/01/2010 (date of deposit under protest) until the date of refund. Cross-references and Integrated Conclusion 1. The issues of entitlement, commencement date, and rate are interlinked: entitlement flows from the nature of the payment (under protest); commencement is determined by established refund jurisprudence treating the refund claim/deposit date (post three-month rule) as the relevant starting point; and the rate follows consistent tribunal practice awarding 12% per annum for similar refund categories. 2. The Tribunal followed controlling precedent on commencement of interest and adopted consistent tribunal authorities on rate and treatment of protest/pre-deposit refunds, applying those principles to allow interest at 12% from the deposit date to refund date.