Interest on Pre-Deposits

[Adarsh Gupta]

Sir's,

I understand that an amendment was made vide Finance (No. 2) Act, 2014, to S 35FF of CEA, 1944 for grant of interest for the period from the date of deposit to the date of payment.

Also a proviso was inserted wherein 'the amount deposited under section 35F, prior to the commencement of the Finance (No. 2) Act, 2014, shall continue to be governed by the provisions of section 35FF as it stood before the commencement of the said Act'.

Accordingly as i understand that the interest on amount deposited prior to this amendment shall be for the period where the refund is not granted within 3 months from the decision in favor of the assessee. Which means that Lets say if an amount was deposited in 2005 and matter got decided in companies favor in 2019 and refund is issued within 3 months of such decision, no interest would be payable.

Is my understanding correct? Further isn't it unfair to keep taxayers money for 14 years without giving any interest? Can this be challenged? Any Case law in support.

Regards,

ADARSH GUPTA

[KASTURI SETHI]

Your views are full of logical force but devoid of statutory force. Govt. has no right to be enriched unjustifiably. The department is allowing interest on the amount of pre-deposit within three months from the date of decision of Appellate Order which was as per Central Excise law. Trade should have raised their voice earlier as opined by you.The voice should have been raised when the pre-deposit amount was raised to 7.5% & 10%. It is pertinent to go through the following case law:-

Refund of pre-deposit - Interest on refund whether payable from date when appeal allowed?

The Supreme Court Bench comprising Hon’ble Mr. Justice S.A. Bobde and Hon’ble Mr. Justice Navin Sinha on 10-12-2018 issued notice in the Petition for Special Leave to Appeal (C) No. 31522 of 2018 = 2018 (12) TMI 592 - SC ORDER filed by Commissioner of Trade and Taxes against the Judgment and Order dated 10-8-2018 of Delhi High Court in Writ Petition (C) No. 3118 of 2018 as reported in 2018 (19) G.S.T.L. 478 (Del.)  = = 2018 (8) TMI 995 - DELHI HIGH COURT (MRF Limited v. Commissioner of Trade and Taxes). While issuing the notice, the Supreme Court passed the following order :

“Issue notice.

Until further orders, the operation of the impugned judgment and order passed by the High Court shall remain stayed.”

The Delhi High Court in its impugned order had held that since refund of pre-deposit became due and payable from the date when appeal was allowed, assessee was also entitled to interest calculable from the date such appeal was allowed.

[Commissioner of Trade and Taxes v. MRF Limited - 2019 (20) G.S.T.L. J47 (S.C.)] = 2018 (12) TMI 592 - SC ORDER

Also see the extract of Board's FAQs in this context which is relevant to the GST regime.

FAQ dated 31.3.17 (Second Edition)

Q18. Whether interest becomes payable on refund of pre-deposit amount?

Ans. Yes. As per Section 115 of the Act, where an amount deposited by the appellant under sub-section (6) of section 107 or under sub-section (8) of section 112 is required to be refunded consequent to any order of the Appellate Authority or of the Appellate Tribunal, as the case may be, interest at the rate specified under section 56 shall be payable in respect of such refund from the date of payment of the amount till the date of refund of such amount.

[SHIVKUMAR SHARMA]

Please refer Circular Number 984/08/2014-CX Dtd.16.09.2014 Issued by Government of India, Ministry of Finance,Department of revenue.

5.2 Pre-deposit for filing appeal is not payment of duty. Hence, refund of pre-deposit need not be subjected to the process of refund of duty under Section 11B of the Central Excise Act, 1944 or Section 27 of the Customs Act, 1962. Therefore, in all cases where the appellate authority has decided the matter in favour of the appellant, refund with interest should be paid to the appellant within 15 days of the receipt of the letter of the appellant seeking refund, irrespective of whether order of the appellate authority is proposed to be challenged by the Department or not.

[DR.MARIAPPAN GOVINDARAJAN]

I endorse the views of Shivakumar Sharma

AI Summary

Forum Debate on Interest for Pre-Amendment Deposits Under Section 35FF of Central Excise Act, 1944 A discussion on a forum addresses the issue of interest on pre-deposits under the amended Section 35FF of the Central Excise Act, 1944, as per the Finance (No. 2) Act, 2014. The amendment stipulates that interest is granted from the deposit date to the payment date, but amounts deposited before the amendment follow the old provisions. One participant questions the fairness of not paying interest on prolonged deposits. Responses highlight the legal framework, referencing case laws and government circulars, and suggest that interest should be paid on refunds following favorable appellate decisions within a specified timeframe.