Refund of pre-deposit

[samir agrawal]

An assessee filed an appeal in Cestat against OIO. A pre-deposit was made in 2013 as a pre condition for staying the order of OIO.

The Cestat has now set aside the OIO and remended the matter to decide afresh.

What is the rate of interest payable by the department on refund of pre deposit of this service tax?

[KASTURI SETHI]

Interest @ 6% per annum fixed for delayed refund of pre-deposit under Section 35FF of Central Excise Act, 1944

In exercise of powers conferred by section 35FF of the Central Excise Act, 1944 (1 of 1944), the Central Government hereby fixes the rate of interest at six percent per annum for the purpose of the said Section.

[Notification No. 24/2014-C.E. (N.T.), dated 12-8-2014]

Section 35 FF of Central Excise Act, 1944 was made applicable to Service Tax law (Finance Act,1994) vide Section 83 of the Finance Act, 1994.

[ABHISHEK TRIPATHI]

We say 12% and the department says 6%.

[KASTURI SETHI]

CESTAT Ahmedabad vide order dated 7.3.23 in the case of Hasmukh Tobacco Products Vs. CCE & ST - 2023 (2) TMI 774 - CESTAT AHMEDABAD, Ahmedabad has held that the interest on refund of pre-deposit is from the date of deposit.

"In view of the above judgments, it is settled that the appellant are entitled for the interest on refund of pre-deposit amount @6% from the date of deposit till the date of refund. Accordingly, the impugned orders are set-aside, appeals are allowed with consequential relief.

[KASTURI SETHI]

Dear Sir,

What is the basis of 12 % ? Pl. inform for enrichment of my knowledge.

[ABHISHEK TRIPATHI]

That is an excellent explanation by learned senior. Querist stated 2013, hence, this 6% will be applicable to him also. Kindly enlighten us !!

[KASTURI SETHI]

Dear Sir,

May I ask to whom are you addressing at serial no.5 above ?

[KASTURI SETHI]

Dear Querist,

There are instances wherein a penalty of 9% interest is imposed for delayed refund. If any Court orders for imposition interest at the rate of higher than prescribed rate that is penalty in the form of enhanced rate of interest. Such penalty does not disturb the rate of interest prescribed in the Act.

Such case laws are easily traceable on google or any website i.e TMI etc.

AI Summary

Interest on pre-deposit refunds fixed by statute; tribunal treats interest as accruing from deposit until refund.
Interest on refunds of pre-deposits in service-tax appeals is governed by a notification-fixed statutory rate under the Central Excise regime as applied to service tax; that statutory rate is the baseline entitlement for delayed refund interest. Tribunal precedent treats interest on pre-deposit refunds as accruing from the date of deposit until refund, while higher rates awarded by courts are characterised as penal or enhanced interest and do not amend the prescribed statutory rate.