2025 (9) TMI 677 - AT - Service Tax

Appeal allowed: refund of deposits under protest with 12% annual interest from deposit until refund; payment within three months

M/s Swadeshi Polytex Ltd. Versus Commissioner of Central Excise & CGST, Ghaziabad

CESTAT (All) allowed the appeal and directed refund of amounts deposited under protest, holding that withholding on unjust enrichment grounds did not ... Refund of amounts deposited during investigation/adjudication proceedings, paid under protest - rejection of refund on the ground of unjust enrichment - eligibility for interest from the date of deposit to the date of refund - HELD THAT:- It is found that in similarly placed situation, the Tribunal in the case of M/s Parle Agro Pvt. Ltd. Vs. Commissioner, CGST Noida [2021 (5) TMI 870 - CESTAT ALLAHABAD] has held that 'the rate of interest varies from 6% to 18% in the aforesaid Notifications issued under sections 11AA, 11BB, 11DD and 11AB of the Excise Act, the grant of interest @12% per annum seems to be appropriate.' The aforesaid view of the Division Bench has also been followed in a series of cases, in the case of M/s Green Valley Industries Ltd [2022 (4) TMI 560 - CESTAT KOLKATA]. Thus, in light of the view taken by this Tribunal in the case of Parle Agro Pvt. Ltd. [2021 (5) TMI 870 - CESTAT ALLAHABAD], the Appellant is entitled to interest @ 12% from the date of deposit till the date of receipt of such refund. The order of the First Appellate Authority is modified to the above extent. The Lower Authorities are directed to compute the eligible interest as above and pay the same within three months from the date of communication of this order. Appeal allowed. ISSUES PRESENTED AND CONSIDERED 1. Whether amounts deposited during investigation/adjudication proceedings, subsequently held refundable, constitute a revenue deposit entitling the depositor to interest. 2. If such deposited amounts are refundable, what is the appropriate legal basis and rate of interest payable-specifically whether interest runs from date of deposit to date of refund and at what rate (12% v. statutory rates such as 6%, 15%, 18%, etc.). 3. Whether statutory provisions governing duty payment, excess collection and delayed refund (as framed under Sections analogous to Sections 11A, 11AA, 11B, 11BB, 11AB, 11DD of the Excise Act) prescribe the exclusive rate/mode of interest for refunds of revenue deposits, or whether comparative guidance from those provisions may be used to fix an appropriate rate. ISSUE-WISE DETAILED ANALYSIS Issue 1: Characterization of amount deposited during proceedings - revenue deposit and entitlement to interest Legal framework: The judgment distinguishes between (a) claims for refund of duty under the statutory refund regime and (b) refunds of amounts deposited during investigation/adjudication (referred to as revenue deposits). Provisions dealing with recovery of duty, delayed payment interest, delayed refund of duty, and excess collection are considered as relevant statutory context. Precedent treatment: The Tribunal has previously treated deposited amounts made during investigation or stay proceedings as revenue deposits and has granted interest on successful refund claims in multiple decisions. High Court decisions have recognized principles relevant to interest on amounts deposited during adjudication. Interpretation and reasoning: The Court observed that the appellant deposited amounts during adjudication which were later held refundable by the appellate authority. Since the claim was for refund of a revenue deposit (and not a statutory refund of duty under the refund provision), the statutory refund provision (Section 11B analog) did not strictly apply. That characterization makes the refund claim fall outside the scheme that prescribes interest specifically for refunds of duty filed under Section 11B. Ratio vs. Obiter: Ratio - amounts deposited during investigation/adjudication that are ultimately ordered to be returned qualify as revenue deposits and attract entitlement to interest. Obiter - broader implications for other types of deposits not before the Tribunal. Conclusion: The deposited amounts are revenue deposits and the appellant is entitled to interest upon successful refund of such deposits. Issue 2: Appropriate rate and period of interest on refund of revenue deposit Legal framework: Multiple interest provisions and notifications were examined: those fixing rates for delayed payment of duty, delayed refunds of duty, and interest on amounts collected in excess of duty. The statutory scheme shows differing notified rates (examples include notifications fixing rates at 6%, 15%, 18% and 15% for various sections), evidencing lack of a single prescribed rate for refunds of revenue deposits. Precedent treatment: The Tribunal's previous reasoning in a Division Bench decision and other Tribunal/F.O. orders applied a 12% per annum rate for refunds of amounts deposited during investigation/adjudication, after survey of relevant statutory rates and authoritative decisions of higher courts. High Court decisions cited in those precedents had applied 12% in analogous circumstances. Interpretation and reasoning: The Court reasoned that because the statutory regime contains multiple differing rates for different heads (ranging from 6% to 18% depending on the provision), and because no specific statutory rate governs refund of revenue deposits, guidance may be taken from the comparable interest provisions and judicial precedents. The Division Bench concluded - and this Court follows - that 12% per annum is an appropriate and equitable rate for interest on refunds of revenue deposits, reflecting a middle ground between the lower notified refund rate (6%) and higher penal/collection rates (15-18%). The Court further held that interest should run from the date of deposit of the amount until the date of receipt of the refund, rather than being limited to post-application periods or only after three months from an appellate direction, because the definitive appeal order fixing refund liability is retrospective to the deposit. Ratio vs. Obiter: Ratio - where amounts deposited during adjudication are refunded, interest should be computed from the date of deposit to date of refund at 12% per annum. Obiter - explanations comparing various statutory rates and the full statutory history are persuasive background rather than binding dicta. Conclusion: The appellant is entitled to interest at 12% per annum from the date of deposit until the date of payment of the refund; the earlier appellate order is to be modified accordingly and lower authorities directed to compute and pay interest within the prescribed time. Issue 3: Applicability and interaction of statutory provisions prescribing different interest rates Legal framework: Provisions examined include those dealing with (i) recovery and show-cause for unpaid/short-paid duties, (ii) interest on delayed payment of duty, (iii) refund of duty and interest thereon, (iv) interest on delayed refunds under statutory refund procedure, and (v) interest on amounts collected in excess of duty. Precedent treatment: Prior Tribunal reasoning considered these varying provisions to determine that none expressly governs refund of revenue deposits; hence comparative guidance is permissible. Higher court decisions have been used to justify adoption of a uniform intermediate rate where statute is silent. Interpretation and reasoning: Because the statute prescribes different rates depending on the nature of the obligation (delayed payment, delayed refund under Section 11B, excess collection, etc.), and because refund of revenue deposit does not neatly fall under the refund provision that prescribes a 6% rate, the Court concluded that adopting an intermediate equitable rate informed by the range of notified statutory rates and judicial decisions is appropriate. The 12% rate reflects consistency with prior Tribunal decisions that balanced competing policy considerations reflected in various notifications. Ratio vs. Obiter: Ratio - statutory provisions with differing rates do not preclude the Tribunal from fixing a fair rate for refunds of revenue deposits where statute is silent; in that context 12% is appropriate. Obiter - detailed comparison of each notification's historical applicability. Conclusion: The statutory interest notifications for various heads do not bar the grant of 12% interest on refund of revenue deposits; the Court directs computation and payment accordingly. Remedial direction (consequential to the above issues) Computation and payment: The appellate order granting refund is modified to include interest at 12% per annum from the date of deposit until the date of receipt of refund. Lower authorities are directed to compute the interest and disburse the amount within three months from communication of the order.