2026 (1) TMI 730 - AT - Customs

Departmental deposit treated as pre-deposit under amended Section 35F/35FF - refund with 6% interest; original claim date upheld u/s 11B(2)

Whether the departmental deposit constituted a pre-deposit attracting statutory interest: applying the post-2014 amendment to Section 35F/35FF and Central ... Refund claim - Entitlement to interest on deposited amount from the date of deposit till disbursement - imposition of penalty and demand of interest - Section 11B(2) of Central Excise Act - Scope of Section 35F - Central Government Circular No. 984/8/2014-CX - HELD THAT:- The Central Government vide Circular No. 984/8/2014-CX. Dated 16.09.2014 has made provisions for interest on the pre-deposited amount by an assessee. Any deposit in the hands of department has to be refunded with interest from the date of deposit in terms of Section 129EE of the Customs Act, 1962. It is also settled that amount paid during investigation is as good as the amount paid under Section 35F of the Central Excise Act. Section 35FF of the Act talks about interest on delayed refund of the amount deposited under Section 35F. This Section got amended in the Year 2014. The perusal makes it clear that prior 2014, the assesse used to be entitled for interest upon the amount of refund of amount of pre-deposit if and only if, the refund was not used to sanction within a period of three months. However, post Finance Act, 2014, the amendment in Section 35F makes assessee always entitled for interest at the rate of not less than five per cent and not more than thirty-six per cent per annum on the amount deposited by the assess/appellant under Section 35F. It is also the admitted and apparent fact that the amount in question was got deposited even prior the SCN was issued. Also the refund claim was initially filed on 21.03.2018. After the Tribunal’s final order in favour of appellant, though another refund claim was filed by appellant on 27.10.2023 but it relates back to the already filed refund claim dated 21.03.2018 (section 11B(2) of Central Excise Act). Hence it is held that refund claim dated 27.10.2023 which was refiled after the order of CESTAT, has wrongly been considered as the original refund application. In view of the settled position and the circumstances of the present case, it is held that since the amount in question is as good as amount of pre-deposit and appellant is held not liable to pay any customs duty, the said revenue deposit is liable to be refunded along with interest to be paid from the date of deposit till the disbursement of said amount at the rate of 6% as fixed by the central government. With these findings, order under challenge is hereby set aside and appeal stands allowed. Issues: (i) Whether the appellant is entitled to interest on the refunded amount from the date of deposit till disbursement; (ii) Whether the refund application filed on 27.10.2023 relates back to the earlier refund claim dated 21.03.2018 and, consequently, whether the later filing can be treated as the original application.Issue (i): Whether the appellant is entitled to interest on the refunded amount from the date of deposit till disbursement.Analysis: The judgment treats amounts deposited during investigation as equivalent to pre-deposit and applies the legal framework granting interest on pre-deposited amounts where the appeal succeeds. The decision relies on the circular and statutory provisions providing for interest on deposits (notably Section 129EE of the Customs Act, 1962 and Section 35FF of the Central Excise Act, 1944) and precedent recognizing entitlement to interest from the date of deposit where the deposit was made pending investigation or litigation.Conclusion: The appellant is entitled to interest on the refunded amount from the date of deposit until disbursement at the rate fixed by the Central Government (6%).Issue (ii): Whether the refund application filed on 27.10.2023 relates back to the earlier refund claim dated 21.03.2018 and whether the later filing was wrongly treated as the original application.Analysis: The judgment applies the relation-back principle under the relevant provisions governing refunds, concluding that the subsequent filing after the tribunal's favourable order relates back to the initially filed refund claim. The subsequent filing was therefore not to be treated as an original application for the purpose of computing entitlement to interest.Conclusion: The refund application dated 27.10.2023 relates back to the refund claim dated 21.03.2018; the later filing was wrongly considered the original refund application for interest computation.Final Conclusion: The revenue deposit is to be refunded with interest from the date of deposit until disbursement at the rate fixed by the Central Government; the impugned order denying interest from the date of deposit is set aside and the appeal is allowed.Ratio Decidendi: A deposit made during investigation is to be treated as a pre-deposit entitling the depositor to interest under Section 129EE of the Customs Act, 1962 (and corresponding provisions), and a refund claim filed earlier remains the basis for interest entitlement even if a subsequent re-filing occurs after a favourable appellate order.