Interest on investigation-stage deposits follows when payment was not voluntary duty discharge and refund is due.

An investigation-stage deposit made after search proceedings and at departmental insistence was treated as a mistaken payment, not a voluntary discharge of excise duty or a voluntary pre-deposit under Section 35F. On that basis, the bar under Section 11B was held inapplicable for denying interest on refund, and the tribunal's earlier view on interest for such deposits was followed. The operative effect is that refunds of amounts paid under mistaken duty liability may carry interest from the date of deposit until the date of refund, here at 12% per annum.

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Issues: Whether the amount deposited during investigation was a voluntary duty payment or a deposit made under a mistaken notion at the department's insistence, and whether interest at 12% per annum was payable on the refunded amount from the date of deposit till the date of refund.

Analysis: The amount of Rs. 20,00,000/- was deposited during investigation pursuant to departmental insistence after search proceedings, and the records showed that it was not a voluntary discharge of excise duty. Such payment was treated as an amount paid under a mistaken notion regarding duty liability, not as a pre-deposit made voluntarily under Section 35F of the Central Excise Act, 1944. On that footing, Section 11B of the Central Excise Act, 1944 was held inapplicable to deny interest, and the reasoning adopted in the earlier tribunal decision allowing interest on investigation-stage deposits was followed. The claim for interest was also supported by the view that refund of such amount must carry interest automatically when the assessee succeeds.

Conclusion: The deposit was not a voluntary duty payment and the assessee was entitled to interest at 12% per annum from the date of deposit till the date of refund.

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