Revenue deposits under protest attract interest from the date of deposit, with equitable 12% per annum applied on refund.

Amounts deposited under protest during provisional assessment, without an adjudicated duty liability, were treated as revenue deposits and not duty. On that basis, Section 11BB of the Central Excise Act, 1944 did not postpone interest to three months after the refund application; interest ran from the respective dates of deposit until actual refund. As the Act prescribed no specific rate for interest on refund of revenue deposits, the rate was fixed on fairness, equity and reasonableness, and the binding precedent applied 12% per annum. The impugned order was set aside and the balance interest was directed to be recomputed and paid.

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Issues: (i) Whether interest on the delayed refund was payable from the respective dates of excess deposit made under protest or only from the expiry of three months after the refund application; (ii) Whether the Appellants were entitled to interest at 12% per annum instead of 6% per annum.

Issue (i): Whether interest on the delayed refund was payable from the respective dates of excess deposit made under protest or only from the expiry of three months after the refund application?

Analysis: The amounts were deposited during provisional assessment under protest, without any quantified or adjudicated duty liability. Once the underlying levy was held unsustainable and the amount was found not to be duty, the amount retained by the Department retained the character of a revenue deposit and not duty. In such a situation, the restriction under Section 11BB of the Central Excise Act, 1944, which applies to refunds of duty, could not be invoked to postpone interest to the post-application period.

Conclusion: The Appellants were entitled to interest from the respective dates of deposit till the date of actual refund, and the contrary view of the lower authorities was unsustainable.

Issue (ii): Whether the Appellants were entitled to interest at 12% per annum instead of 6% per annum?

Analysis: Since the refund was of a revenue deposit and not of duty, the statutory rate prescribed for delayed refund of duty was inapplicable. The Central Excise Act, 1944 contains no specific rate for interest on refund of revenue deposits, and the appropriate rate was to be determined on principles of fairness, equity, and reasonableness. Binding precedent affirmed the grant of interest at 12% per annum in such matters.

Conclusion: The Appellants were entitled to interest at 12% per annum from the respective dates of deposit till the date of actual refund.

Final Conclusion: The impugned order was set aside and the Revenue was directed to recompute and pay the balance interest at 12% per annum after adjusting the amount already sanctioned.

Ratio Decidendi: Amounts deposited under protest without an adjudicated duty liability are revenue deposits, not duty, and therefore interest on their refund runs from the date of deposit at a ly determined equitable rate rather than the statutory rate applicable only to refunds of duty.

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