TaxTMI 
TaxTMI 
2025 (1) TMI 1369
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....ount of Rs. 12,93,272/- already deposited by the appellant, prior to issuance of show cause notice, an amount of Rs. 7,86,114/- has been found refundable vide the impugned OIO in view of the OIA dated. 7. In view of the foregoing facts, I conclude that the said amount of Rs. 7,86,114/- which was deposited by the appellant on the insistence of the department and before issuance of show cause notice can not be termed as duty and the said amount has to be treated merely as "deposit" 8. Having concluded so, I now turn my attention to provisions/ judicial pronouncements governing the provisions of grant of interest on such deposits. In this regard, I find that the amount in question was not deposited by the appellant neither as the duty nor the interest on that duty. Rather it was an amount paid by them during the course of investigation on the insistence of the department. It is also a fact that the said amount was not deposited by the appellant towards voluntarily admitted duty. Therefore, I am in complete agreement of the contention of the appellant that the said amount is required to be considered as mere "deposit" and not "duty". 9. I find enough force be....
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....arious appellate authorities, some of which are listed as under: (i) Hon'ble Madras High Court in the case of CCE, Chennai-II vs. Ucal Fuel Systems Ltd. Vs. CCE, Chennai-II, reported in [2014 (306) E.L.T. 26 (Mad.)] has held that "Interest on delayed refund Amount paid during investigation Interest at 6% per annum payable from date of deposit till date of payment Section 11BB of Central Excise, Act, 1944." (ii) The Hon'ble Delhi High Court, in the case of Team HR Services Pvt. Ltd. Vs. UOI, reported in (2020 (38) G.S.T.L. 457 (Del.)] has held that - "Interest on delayed refund Amount of Rs. 2,38,00,000 deposited by petitioner of its own volition, during audit/investigation, though under protest - Refund of said amount sought vide letter dated 2nd May, 2018 - Petitioner entitled to interest @ 6% per annum from date of deposit." (iii) The Hon'ble CESTAT, Principal Bench, New Delhi in the case of BSL Ltd. vs. CCE (Final Order No. 50699/2019 dated 15/05/2019], has observed that even though there is no provision for grant of interest over delayed payment of interest, yet it is allowable because there is no prohibition in law. (iv) Hon'....
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....culated w.e.f. date of deposit. 2.5 The jurisdictional officer vide Order-In-Original dated 16.02.2022 sanctioned the refund of the principal amount of Rs.7,86,114/- without any interest to the Appellant. He rejected the refund of an amount of Rs 6,432/-. 2.6 Aggrieved Appellant filed an appeal before the Commissioner (Appeals) who vide Order-In-Appeal dated 06.07.2022 who allowed for granting interest in terms of provisions of Section 11BB of the Central Excise Act, 1944 from the date of deposit to the date of payment of refund. 2.7 Aggrieved Appellant has filed this appeal claiming the interest at rate of 12%. 3.0 Heard Shri Parth Mullick, Advocate appearing on behalf of the Appellant. 3.1 Heard Shri A.K. Choudhary learned Authorized Representative for the Revenue, who reiterates the findings recorded in the impugned order. 4.1 I have considered the impugned order along with the submissions made in appeal and during the course of arguments. 4.2. Appellant has filed this appeal assailing the above order and have claimed the refund from the date of deposit at the rate of 12%. They have claimed the same on the basis of the order of the Tribunal in the case of: ....
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.... issued under Section 11AA of the Excise Act provides interest at the rate of fifteen per cent per annum. The notification is reproduced below : Notification No. 15/2016-C.E. (N.T.), dated 1-3-2016 Notification Under Section 11AA Rate of interest on delayed payment of duty (w.e.f. 1-4-2016). - In exercise of the powers conferred by section 11AA of the Central Excise Act, 1944 (1 of 1944) and in supersession of the notification of the Government of India in the Ministry of Finance (Department of Revenue) No. 5/2011-Central Excise (N.T.), dated the 1st March, 2011 published in the Gazette of India, Extraordinary, Part II, Section 3, sub-section (i), vide, number GSR 136(E), dated the 1st March, 2011, except as respects things done or omitted to be done before such supersession, the Central Government hereby fixes the rate of interest at fifteen per cent per annum for the purpose of the said section. 2. This notification shall come into force from the 1st day of April, 2016. 36. The Notification issued under Section 11BB provides interest at the rate of six per cent per annum. It is reproduced below : Notification No. 67/2003-C.E. ....
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....the decision of the Supreme Court in Sandvik Asia Ltd., the High Court granted interest at the rate of 12% per annum in matters relating to refund of amount deposited during investigation and adjudication. 40. In Riba Textiles, the Tribunal also granted interest at the rate of 12% on refund of amount deposited during investigation and at the time of entertaining the stay application. 41. In view for the aforesaid decisions, and the fact that the rate of interest varies from 6% to 18% in the aforesaid Notifications issued under Sections 11AA, 11BB, 11DD and 11AB of the Excise Act, the grant of interest @ 12% per annum seems to be appropriate." B. Continental Engines Pvt Ltd. [2022 (382) ELT 522 (T-Del)] "7. A perusal makes it clear that the amount of pre-deposit is to be refunded along with the interest which was not below 5% and shall not exceed 36%. No concept of any time-limit is being mentioned in the said provision. Hon'ble Apex Court also has settled this issue in the case of Sandvik Asia Ltd. reported as 2006 (196) E.L.T. 257 (S.C.) holding the assessee entitled for interest along with the refund of the amount which he was not liable to pay....
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....d writ petitioner showed that there was delay ranging from 94 to 290 days. 3.2 In the circumstances it was prayed inter alia :- "(a) to issue writ of mandamus and/or any other appropriate writ(s) for directions is the Respondents for providing appropriate compensation as well as interest, for delay in the granting of refund;" 4. The first case arises out of Special Civil Application No. 18591 of 2018 filed by M/s. Willowood Chemicals Pvt. Ltd. submitting that said Writ Petitioner was entitled on the basis of Section 16 of the IGST Act read with Section 54 of the CGST Act for compensation in receipt of delayed payment as detailed in Annexure D of the petition, which in turn dealt with 12 refunds with delay ranging between 94 to 290 days. The special civil application had thus prayed for appropriate compensation. 5. In both the petitions it was submitted that inaction leading to inordinate delay in granting refunds was per se arbitrary and that the inordinate delay impacted the working capacity of the Writ Petitioners thereby reducing their ability to conduct business and as such appropriate compensation ought to be awarded along with interest for ....
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....ecial Civil Application No. 15925 of 2018, decided on 10-7-2019, this writ application is allowed to the extent that the writ applicants are entitled to the interest for the delayed payment at the rate of 9% per annum. The authority concerned shall look into the chart provided by the writ applicants, which is at Page 30, Annexure D to the writ application and calculate the aggregate refund, the writ applicants are entitled to 9% per annum interest from the date of filing of the GSTR-38. The respondents shall undertake this exercise at the earliest and calculate the requisite amount towards interest. Let this exercise be undertaken and completed within a period of two months from the date of receipt of the writ of this order. The requisite amount towards the interest shall be paid to the writ applicants within a period of two months from the date of receipt of the writ of this order." 8. The appellant being aggrieved, preferred Review Petitions in both the cases. It was submitted inter alia : "4. It is respectfully submitted that this Hon'ble Court has directed the respondent authority to pay simple interest on the delayed payment at the rate of 9% per ann....
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....s a tax. This Court has made a distinction between a direction for refund given by way of consequential order in a case where the legality of the assessment is questioned and a case where the petition is only for the purpose of seeking refund. It has been observed : "We do not consider it proper to extend the principle justifying the consequential order directing the refund of amount illegally realised, when the order under which the amounts had been collected has been set aside, to cases in which only orders for the refund of money are sought. The parties had the right to question the illegal assessment orders on the ground of their illegality or unconstitutionality and, therefore, could take action under Article 226 for the protection of their fundamental right, and the courts, on setting aside the assessment orders, exercised their jurisdiction in proper circumstances to order the consequential relief for the refund of the tax illegally realised. We do not find any good reason to extend this principle and, therefore, hold that no petition for the issue of a writ of mandamus will be normally entertained for the purpose of merely ordering a refund of money to the return o....
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....t in Suganmal v. State of M.P. [AIR 1965 SC 1740] has held that the prayer in the writ petition being one for payment of interest, it should be considered to be a writ petition filed to enforce a money claim and therefore, not maintainable. The observations in Suganmal [AIR 1965 SC 1740] related to a claim for refund of tax and have to be understood with reference to the nature of the claim made therein. The decision in Suganmal [AIR 1965 SC 1740] has been explained and distinguished in several subsequent cases, including in U.P. Pollution Control Board v. Kanoria Industrial Ltd. [(2001) 2 SCC 549] and ABL International Ltd. v. Export Credit Guarantee Corpn. of India Ltd. [(2004) 3 SCC 553] The legal position becomes clear when the decision in Suganmal [AIR 1965 SC 1740] is read with the other decisions of this Court on the issue, referred to below : (i) Normally, a petition under Article 226 of the Constitution of India will not be entertained to enforce a civil liability arising out of a breach of a contract or a tort to pay an amount of money due to the claimants. The aggrieved party will have to agitate the question in a civil suit. But an order for payment of money ma....
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....spute, where the collection of money was without the authority of law and there was no case of undue enrichment, there is no good reason to deny a relief of refund to the citizens. But even in cases where collection of cess, levy or tax is held to be unconstitutional or invalid, refund is not an automatic consequence but may be refused on several grounds depending on facts and circumstances of a given case. (Vide U.P. Pollution Control Board v. Kanoria Industrial Ltd. [(2001) 2 SCC 549]) (vi) Where the lis has a public law character, or involves a question arising out of public law functions on the part of the State or its authorities, access to justice by way of a public law remedy under Article 226 of the Constitution will not be denied. (Vide Sanjana M. Wig v. Hindustan Petroleum Corporation Ltd. (2005) 8 SCC 242) We are therefore of the view that reliance upon Suganmal was misplaced to hold that the writ petition filed by the appellant was not maintainable." 16. We, therefore, proceed to consider the merits. Turning to the basic question it must be noted that in the following cases, this Court dealt with the question as to payment of interest on the a....
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....uestion of equity. There is no right to get interest on refund except as provided by the statute. The interest on excess amount of advance tax under Section 214 is not paid from the date of payment of the tax. Nor is it paid till the date of refund. It is paid only upto the date of the regular assessment. No interest is at all paid on excess amount of tax collected by deduction at source. Before introduction of Section 244(1A) the assessee was not entitled to get any interest from the date of payment of tax upto the date of the order as a result of which excess realisation of tax became refundable. Interest under Section 243 or Section 244 was payable only when the refund was not made within the stipulated period upto the date of refund. But, if the assessment order was reduced in appeal, no interest was payable from the date of payment of tax pursuant to the assessment order to the date of the appellate order. Therefore, interpretation of Section 214 or any other section of the Act should not be made on the assumption that interest has to be paid whenever an amount which has been retained by the tax authority in exercise of statutory power becomes refundable as a result o....
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.... did not contain any provision either requiring or prohibiting payment of interest), upheld the award of interest at 6% per annum. 11. Section 24 of the Act requires the Collector, after possession of surplus land was taken over under Section 21(4) of the Act, to cause public notice requiring persons interested to lodge their claims. Section 25 of the Act provides for determination of compensation and apportionment thereof. Section 26 deals with mode of payment of amount of compensation and the same is extracted below : "26. Mode of payment of amount of compensation. - (1) The amount of compensation may, subject to the provisions of subsection (3), be payable in transferable bonds carrying interest at three per cent per annum. (2) The bonds shall be - (a) of the following denominations, namely - Rs. 50; Rs. 100; Rs. 200; Rs. 500; Rs. 1000; Rs. 5000 and Rs. 10,000; and (b) of two classes - one being repayable during a period of twenty years from the date of issue by equated annual instalment of principal and interest, and the other being redeemable at par at the end of a period of twenty years from the date of issue. It shall be at the op....
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....umstances of each case. When a specific provision has been made under the statute, such provision has to govern the field. Therefore, the court has to take all relevant factors into consideration while awarding the rate of interest on the compensation." (D) In Gujarat Fluoro Chemicals, the correctness of the decision in Sandvik Asia Ltd. came up for consideration before a Bench of three Judges of this Court, and the matter was considered thus : "3. In order to answer the aforesaid issue before us, we have carefully gone through the judgment of this Court in Sandvik case [Sandvik Asia Ltd. v. CIT, (2006) 2 SCC 508] and the order of reference. We have also considered the submissions made by the parties to the lis. 4. We would first throw light on the reasoning and the decision of this Court on the core issue in Sandvik case [Sandvik Asia Ltd. v. CIT, (2006) 2 SCC 508]. The only issue formulated by this Court for its consideration and decision was whether an assessee is entitled to be compensated by the Income Tax Department for the delay in paying interest on the refunded amount admittedly due to the assessee. This Court in the facts of the said case had no....
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....stitutional validity of the Devika Rani Roerich Estate (Acquisition & Transfer) Act, 1996, and Section 110 of the Karnataka Lands Reforms Act, 1996 and certain notifications issued by the State Government. The questions which arose for consideration were set out in paragraph 25 of the decision as under :- "Whether the relevant provisions violated the basic structure of the Constitution in so far as they conferred power on the executive government for withdrawal of exception without hearing and without reasons and whether the provisions of the Acquisition Act were protected by Article 31(A) of the Constitution and whether they were violative of Article 300(A) of the Constitution?" After dealing with these questions, the reference was answered thus : We, therefore, answer the reference as follows : (a) Section 110 of the Land Reforms Act and the Notification dated 8-3-1994 are valid, and there is no excessive delegation of legislative power on the State Government. (b) Non-laying of the Notification dated 8-3-1994 under Section 140 of the Land Reforms Act before the State Legislature is a curable defect and it will not affect the validity ....
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....as not strictly covered by the statute and as such it would be in the realm of discretion of the Court. It must also be noted here that the inordinate delay of up to 17 years in making refunds was a special circumstance when this Court was persuaded to accept grant of interest at the rate of 9 per cent per annum in Sandvik Asia Ltd. Even while doing so, the observations made by this Court in Paragraph 48 of the decision are quite clear that "the award of interest in refund and amount must be as per the statutory provisions of law and whenever a specific provision has been made under the statute such provision has to govern the field." The subsequent decision of the Bench of three Judges in Gujarat Fluoro Chemicals noticed that the grant of interest at the rate of 9 per cent was in the facts of the case in Sandvik Asia Ltd. 19. Since the delay in the instant case was in the region of 94 to 290 days and not so inordinate as was the case in Sandvik Asia Ltd., the matter has to be seen purely in the light of the concerned statutory provisions. In terms of the principal part of Section 56 of the CGST Act, the interest would be awarded at the rate of 6 per cent. The award of int....
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.... (3) of Section 11B, as it now stands, is to the same effect - indeed, more comprehensive and all-encompassing. It says, "(3) Notwithstanding anything to the contrary contained in any judgment, decree, order or direction of the Appellate Tribunal or any court or in any other provision of this Act or the rules made thereunder or in any law for the time being in force, no refund shall be made except as provided in sub-section". The language could not have been more specific and emphatic. The exclusivity of the provision relating to refund is not only express and unambiguous but is in addition to the general bar arising from the fact that the Act creates new rights and liabilities and also provides forums and procedures for ascertaining and adjudicating those rights and liabilities and all other incidental and ancillary matters, as will be pointed out presently. This is a bar upon a bar - an aspect emphasised in Para 14, and has to be respected so long as it stands. The validity of these provisions has never been seriously doubted. Even though in certain writ petitions now before us, validity of the 1991 (Amendment) Act including the amended Section 11B is questioned, no spec....
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....avourable to an assessee/manufacturer, whether on the question of classification, valuation or any other issue, does not automatically entail refund. Section 11B of the Central Excises and Salt Act and Section 27 of the Contract Act, whether before or after 1991 amendment - as interpreted by us herein - make every refund claim subject to proof of not passing-on the burden of duty to others. Even if a suit is filed, the very same condition operates. Similarly, the High Court while examining its jurisdiction under Article 226 - and this Court while acting under Article 32 - would insist upon the said condition being satisfied before ordering refund. Unless the claimant for refund establishes that he has not passed on the burden of duty to another, he would not be entitled to refund, whatever be the proceedings and whichever be the forum. Section 11B/Section 27 are constitutionally valid, as explained by us hereinbefore. They have to be applied and followed implicitly wherever they are applicable. 99. The discussion in the judgment yields the following propositions. We may forewarn that these propositions are set out merely for the sake of convenient reference and are not sup....
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....basis for maintaining a suit or a writ petition. All refund claims except those mentioned under Proposition (ii) below have to be and must be filed and adjudicated under the provisions of the Central Excises and Salt Act or the Customs Act, as the case may be. It is necessary to emphasise in this behalf that Act provides a complete mechanism for correcting any errors whether of fact or law and that not only an appeal is provided to a Tribunal - which is not a departmental organ - but to this Court, which is a civil court." 4.6 Even if the amount is considered to be refund of deposit then also the same has to be refunded under section 11B as the said section has provided for the refund of deposit lying in account current. The said provision as enshrined in Section 11B is reproduced below: 11B. Claim for refund of duty and interest, if any, paid on such duty.- (1) Any person claiming refund of any duty of excise and interest, if any, paid on such duty may make an application for refund of such duty and interest, if any, paid on such duty to the Assistant Commissioner of Central Excise or Deputy Commissioner of Central Excise]] before the expiry of two years from ....
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.... the decision of Hon'ble Supreme Court in case of Mafatalal Industries and the above provisions whether of the duty, interest or any deposit made are governed by the provision of Section 11B of the Act. The interest thus gets governed by the provisions of Section 11BB as has been held by Hon'ble Supreme Court in case of Ranbaxy, referred in the impugned order. There has been exception carved out only for determination of relevant date for determining the period for which interest is to be paid in respect of deposit made as per Section 35F for filing the appeal before an appellate authority. Section 35FF provides that interest would be paid from the date of deposit made under Section 35F. 4.9 Hon'ble Delhi High Court has in case of Goldy Engineering Works [Order dated 14.07.2023 in WP (C) 4332/2022] observed as follows: "3. For the sake of brevity, the Court deems it apposite to notice the facts as they obtain in the writ petition filed by M/s Goldy Engineering Works vs. Commissioner of Central Excise & Anr.3 On 27 July 2006, a Show Cause Notice is stated to have been issued to the petitioner, its proprietor, one M/S Aay Kay Engineering Works and its proprietor, in respe....
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.... Section 11-BB. Interest on delayed refunds.- ... 22. It would also be pertinent to notice Sections 35F and 35FF in order to highlight the distinction between the statutory scheme underlying refund of duty and the return of a pre-deposit made in connection with an appeal that may be preferred. Those two provisions are extracted hereinbelow: - "Section 35-F. Deposit of certain percentage of duty demanded or penalty imposed before filing appeal.-The Tribunal or the Commissioner (Appeals), as the case may be, shall not entertain any appeal- (i) under sub-section (1) of Section 35, unless the appellant has deposited seven and a half per cent of the duty, in case where duty or duty and penalty are in dispute, or penalty, where such penalty is in dispute, in pursuance of a decision or an order passed by an officer of Central Excise lower in rank than the [Principal Commissioner of Central Excise or Commissioner of Central Excise]; (ii) against the decision or order referred to in clause (a) of subsection (1) of Section 35-B, unless the appellant has deposited seven and a half per cent of the duty, in case where duty or duty and penalty are in disput....
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....TAT came to be dismissed. 24. We deem it apposite to observe that the mere pendency of an appeal or an order of stay that may operate thereon would not detract from the obligation of any person claiming a refund making an application as contemplated under Section 11B(1) within the period prescribed and computed with reference to the "relevant date". We do so observe in light of the indubitable principle that an order of stay that may operate in an appeal does not efface the demand or the obligation of refund that may have sprung into existence. It merely places the enforcement of the order appealed against in abeyance. The order of stay would, in any case, be deemed to have never existed once the appeal comes to be dismissed. 25. We further note that the subject of interest on delayed refund which is governed by Section 11BB itself prescribes the starting point for payment of interest on delayed refunds to be the date when an application under Section 11B(1) is received. On a conjoint reading of Sections 11B and 11BB of the 1944 Act, therefore, we come to the irresistible conclusion that interest on delayed refund is clearly dependent upon the making of a formal a....
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....of an application and a declaration to the aforesaid effect is thus not merely an empty formality. This too appears to reinforce the imperatives of an application being formally made before a claim for refund is considered. 30. That only leaves the Court to consider the decisions which were cited by Mr. Mishra for our consideration. However, before proceeding to do so, we deem it pertinent to enter the following prefatory observations. A levy of interest on refund must undoubtedly follow where it is found that the amount has been unjustifiably retained or remitted with undue delay. The respondents cannot be permitted to retain moneys which are otherwise not due or are otherwise liable to be returned. The solitary question which stands raised in these matters is the date from which that interest would flow. In Shri Jagdamba Polymers, the High Court on facts had found that the refund was inordinately delayed even though a claim for the same had been promptly lodged. This is clearly evident from Para 7 of the report. The said decision is thus clearly not an authority for the proposition that a refund must automatically follow de hors the requirements of Sections 11B and 11BB.....