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 excise liability rather than a voluntary payment of duty. On that basis, the refund was held outside the ordinary duty-refund regime under Section 11B of the Central Excise Act, 1944, and interest was payable on the refunded sum from the date of deposit until refund. The applicable interest rate was 12% per annum.

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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.

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