Interest on Deposited Amounts Refunded: entitlement from date of deposit until refund, awarded at 12% p.a.

Whether the appellant is entitled to interest on amounts deposited and subsequently refunded: applying the principle laid down by the SC in Sandvik Asia Ltd., the Tribunal held that interest accrues from the date of initial payment/deposit until refund because the right to interest follows payment pending recovery; relying on the Kerala HC decision in Sony Pictures Networks, interest is payable at 12% per annum. The Tribunal, being bound by SC precedent, therefore awarded interest on the deposited amount from date of deposit until realization at 12% p.a.

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Issues: (i) Whether the appellant is entitled to interest on the pre-deposit amount from the date of deposit until its refund and, if so, at what rate.

Analysis: The Tribunal applied the Supreme Court principle that where revenue has unjustifiably retained an assessee's funds the assessee is entitled to interest for the period of retention. The Tribunal considered precedent limiting the appropriate rate of interest to 12% per annum in the absence of a statutory rate, and relied on decisions applying that principle to pre-deposits and delayed refunds. The statutory context included provisions under the Finance Act, 1994 and provisions concerning pre-deposits and refunds under the Central Excise Act, 1944, as they relate to recovery, refund and interest claims.

Conclusion: The appellant is entitled to interest on the deposited amount from the date of deposit until its refund at the rate of 12% per annum in favour of the assessee.

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