2025 (9) TMI 1271 - HC - Central Excise

Pre-deposit refundable on remand; unjustified withholding entitles appellant to statutory interest at 12% p.a. for delayed payment

Reliance Industries Limited Versus The Commissioner of Customs And Central Excise, Nagpur.

HC held that a pre-deposit must be refunded when an appellate authority remands the matter, and withholding it without valid reason entitles the appellant ... Refund of pre-deposit only when the Appellate Authority decides the Appeal finally in its favour and that no such right accrues to the Appellant if the Appeal is decided by way of a remand - HELD THAT:- The fact noted, wherein the Appellate Tribunal had remanded the matter back to the original Adjudicating Authority, the respondent had refused to return the pre-deposit amounting to Rs.1 Crore which was due for return within 3 months from the date of Tribunal’s order. The respondent, however, had returned the deposit on 01/09/2005. The appellant requested for the interest @12.00% p.a. from the date it was due till the amount of pre-deposit was actually paid, which according to the appellant comes to Rs. 14,89,315/-. As such, learned counsel for the respondent made an attempt to justify withholding the amount of interest, however, considering the position of law and the Circulars issued by the Board, we are of the view that the appellant was entitled for the refund of pre-deposit within three months from the date of order of remand i.e. 05/03/2004. The deposit having been withheld till 01/09/2005, for no valid reason, the respondent is liable to pay the appellant interest @12.00%p.a. for the delayed payment. Accordingly, both the questions of law are answered in the negative. Appeal allowed. ISSUES PRESENTED AND CONSIDERED 1. Whether a pre-deposit made under Section 35F of the Central Excise Act is refundable to the appellant when the Appellate Tribunal disposes of the appeal by remanding the matter to the original adjudicating authority, or whether refund entitlement arises only where the appellate authority finally decides the appeal in the appellant's favour. 2. Whether earlier authorities relied upon by the appellant in which the appellate tribunal had remanded the matter are relevant and controlling for the proposition that pre-deposits must be returned on remand. 3. Whether, having regard to statutory scheme and administrative instructions, interest is payable for delay in refund of the pre-deposit, and if so at what rate and from what date until actual realization. ISSUE 1 - Refundability of Pre-deposit on Remand (Legal Framework) Legal framework: Section 35F governs pre-deposit of duty as a condition for filing appeals to appellate authorities; no statutory provision requires deposit at the adjudication stage prior to quantification of liability; appellate orders may finally decide appeals or remit for re-adjudication. ISSUE 1 - Precedent Treatment Precedent: Prior judicial decisions have treated pre-deposits as refundable where appeals succeed, whether fully or partly; some authorities had addressed situations where the appellate body remanded matters and directed refund or held that continued retention was unjustified. ISSUE 1 - Interpretation and Reasoning The Court reasons that when an appellate tribunal remands the matter for fresh adjudication, parties are effectively returned to the position of facing the original show-cause notice; the statutory requirement for pre-deposit under Section 35F is tied to the appellate process after adjudication has quantified liability. If the appellate disposition does not confirm the adjudicated liability but sends the matter for re-examination (i.e., removes the final, adverse appellate adjudication), there is no legal justification for continued retention of the pre-deposit by the revenue. ISSUE 1 - Ratio vs. Obiter Ratio: A pre-deposit under Section 35F is liable to be refunded where the appellate authority remands the matter for re-adjudication because remand does not constitute a final adverse adjudication that justifies retention; retention beyond lawful entitlement attracts liability to refund and may attract interest. Observations to the contrary by the Appellate Tribunal in the matter under challenge are not followed. ISSUE 1 - Conclusion The Court answers in the negative the proposition that entitlement to refund arises only on a final appellate decision in favour of the appellant; on remand the pre-deposit must be returned. ISSUE 2 - Relevance of Earlier Authorities Where Remand Occurred (Legal Framework) Legal framework: Uniform application of law requires consideration of prior decisions which dealt with identical factual and legal matrices, including appellate remand, and administrative practice expressed in Board circulars. ISSUE 2 - Precedent Treatment Precedent: Decisions cited by the appellant that remanded matters and ordered refund of deposits were treated as relevant and applicable. The Court follows those decisions insofar as they hold that remand does not justify continued retention of pre-deposits and that refund with interest may be warranted for undue delay. ISSUE 2 - Interpretation and Reasoning The Court distinguishes no material factual or legal feature that would render earlier remand-on-refund authorities inapplicable; instead, it regards them as directly on point and persuasive. The tribunal's contrary stance that remand does not attract refund is held to be erroneous in light of statutory scheme and precedent. ISSUE 2 - Ratio vs. Obiter Ratio: Authorities in which appellate remand was followed by an order for refund of pre-deposit are applicable and support the legal proposition that remand obliges return of the deposit absent a valid stay or other continuing jurisdictional basis for retention. ISSUE 2 - Conclusion The Court holds the earlier decisions involving remand to be relevant and applicable; the appellate tribunal's contrary holding is rejected. ISSUE 3 - Entitlement to Interest for Delay; Board Circulars and Administrative Directions (Legal Framework) Legal framework: Administrative instructions from the central Board require uniform procedure for return of pre-deposits and direct that pre-deposits should be returned within three months from the date of the order passed by the appellate authority, unless a superior court stay operates. The Board warned that delay beyond three months would attract adverse view, possible departmental discipline, and liability for interest recoverable from officers responsible for default. ISSUE 3 - Precedent Treatment Precedent: Courts have applied Board directions and prior judicial pronouncements to award interest for wrongful retention of pre-deposits; past judgments have quantified interest where retention was unjustified and protracted. ISSUE 3 - Interpretation and Reasoning The Court applies the Board's circulars and prior judicial holdings to the facts: where the tribunal remanded the matter on 05/03/2004, the pre-deposit became due for return within three months (absent any superior court stay). Retention until 01/09/2005 was without valid reason. Given the administrative direction and the clear statutory and precedential basis, the revenue's withholding attracts interest liability. The Court exercises its discretion to award interest at 12% per annum for the delayed period, acknowledging the appellant's claim and the Board's prescription that delay will be viewed adversely and may give rise to interest liability recoverable from responsible officers. ISSUE 3 - Ratio vs. Obiter Ratio: Where a pre-deposit is wrongfully retained after an appellate remand and no stay operates, the revenue must refund the deposit within the prescribed administrative period; failure to do so attracts an obligation to pay interest for the period of unlawful retention. The Court's award of interest at a specified rate (12% p.a. in the present instance) is a dispositive relief in the case before it. ISSUE 3 - Conclusion The Court directs refund of the pre-deposit and awards interest at 12% per annum for the period the deposit was withheld beyond the three-month period following the Tribunal's remand order until actual realization; no costs awarded. OVERALL CONCLUSIONS The Court answers both legal questions negatatively: the Appellate Tribunal erred in holding that refund accrues only on a final appellate decision and not on remand; prior authorities addressing remand and refund are relevant and applicable; administrative instructions obligate return of pre-deposits within three months absent a stay, and unjustified withholding attracts interest - awarded here at 12% p.a. for the delayed period.