2026 (3) TMI 1443 - AT - Central Excise

Interest on investigation deposit allowed where payment was not voluntary duty, with refund carrying 12% per annum.

An amount deposited during investigation at the Department's insistence, and later refunded, was treated as a deposit made under a mistaken notion of ... Interest on refund of investigation deposit - pre-deposit under Section 35F - Deposit made under mistaken notion - voluntary payment of central excise duty - refund provisions applicable to duty claims under Section 11B - Distinction between duty payment and pre-deposit. Interest on refund of investigation deposit - Deposit made under mistaken notion - Distinction between duty payment and pre-deposit - HELD THAT: - The Tribunal found from the record, including the recital in the appellate order, that the amount was deposited during search proceedings on departmental insistence and not as a voluntary discharge of central excise duty. Since the appellant had throughout disputed the liability and ultimately succeeded, the amount could not assume the character of duty. On that basis, the Tribunal held that the bar applicable to refund of duty under Section 11B was inapplicable, and the case was governed by the principle that an amount deposited under mistake and without authority of law cannot be retained by the Department. Following its earlier decision in M/s. Harrisons Industries [2025 (7) TMI 220 - CESTAT KOLKATA], which had been affirmed by the High Court by dismissal of the Revenue's appeal on the ground that no substantial question of law arose, the Tribunal held that such refunded deposit carried interest at 12% per annum from the date of deposit till the date of refund. The decision relied on by the Revenue in M/s. Goldy Engineering Works [2025 (4) TMI 1186 - SC ORDER] was distinguished because, in that case, the amount had been treated as duty and the issue of payment under mistaken notion had not arisen in the manner found in the present case. [Paras 7, 8, 9, 10] The appellant was held entitled to interest at 12% per annum on the refunded amount from the date of deposit till the date of refund. Final Conclusion: The Tribunal held that the amount deposited during investigation was not a voluntary duty payment but a deposit made under mistake at departmental insistence, and therefore carried interest on refund. The appeal was accordingly allowed to the extent of granting interest at 12% per annum from the date of deposit till the date of refund. Issues: Whether interest at 12% was payable on the amount deposited during investigation and later refunded, and whether the deposit could be treated as a voluntary payment or a pre-deposit attracting the refund regime under the Central Excise Act, 1944.Analysis: The amount was deposited during investigation at the insistence of the Department and was not a voluntary discharge of duty liability. The payment was made under a mistaken notion regarding excise liability and, on the facts recorded, could not be characterised as duty voluntarily paid. In such circumstances, the refund claim was not governed by the refund provisions applicable to duty claims under Section 11B of the Central Excise Act, 1944. Following the view already taken in the Tribunal's earlier decision, as affirmed by the High Court, interest was held payable on the refunded amount from the date of deposit till the date of refund, at the rate of 12%.Conclusion: The appellant was held entitled to interest at 12% per annum on the refunded deposit from the date of deposit till the date of refund.Ratio Decidendi: An amount deposited during investigation at departmental insistence, and later refunded, carries interest where it is not a voluntary duty payment but a deposit made under a mistaken notion of liability.