Assesse entitled for an interest of 12% on Pre-Deposit Amount u/s 35F: CESTAT

The Customs, Excise & Service Tax Appellate Tribunal (CESTAT), of New Delhi, Principal Bench ruled that the assessee is entitled to a 12 percent interest on the pre-deposit amount under Section 35F of the Central Excise Act.

M/s Elegant Developers, the appellants, provide Real Estate Agent Services and are Service Tax registered. The DGCEI, New Delhi, issued a show cause notice to the appellants, recommending a demand, interest, and penalty. The original Adjudicating Authority approved the proposal. The aforementioned Order-in-Original, however, has been set aside by this Tribunal. The appellant then filed a refund claim for the pre-deposit of Rs.22,05,981/-.In favour of the appellant, the stated sum was sanctioned, together with interest of Rs.5,53,006/-. The Department filed an appeal against the said ruling, and the Commissioner (Appeals) granted the Department’s appeal, setting aside the original order and sanctioning interest in the sum of Rs.5,53,006/-. Having been wronged, the appeal was filed with CESTAT.

The disputed sum was deposited in accordance with Section 35F of the Central Excise Act of 1944, which requires the deposit of a percentage of the duty demanded or penalty imposed prior to launching an appeal. This amount of deposit must be reimbursed in accordance with the order of the appropriate Appellate Authority in terms of Section 35FF of the Central Excise Act prior to filing an appeal either before the Commissioner (Appeals) (7.5 percent) or before this Tribunal (an extra 2.5 percent). The contested reimbursement claim was filed after the appellant’s appeal against the Order in-Original was dismissed by this Tribunal. Appellant is also entitled to interest and a reimbursement of the pre-deposit amount under Section 35FF. The Finance Act of 2014, however, made a change to this section.

The fundamental issue here at hand is whether Section 35FF pre-amendment or Section 35FF post-amendment will apply to the current instance.

On behalf of the appellant, it was claimed that the Commissioner (Appeals) had denied the appellant’s claim to interest on the sanctioned refund based on the unamended Section 35FF of the Central Excise Act, 1944. It was argued that because the adjustment to Section 35FF of the Central Excise Act is solely clarifying in nature, it should be applied retroactively. Commissioner (Appeals continued )’s reliance on the old Section 35FF is thus deemed to be completely incorrect. Furthermore, the appellant’s pre-deposit was not a payment of duty, so it was an amount kept by the Department without authority from the date of payment.

The appellant filed an appeal before this Tribunal against an Order-in-Original dated September 30, 2013, and the money needed under Section 35F to be placed while submitting such appeal was reportedly deposited on October 6, 2015. This examination reveals that the amount of pre-deposit under Section 35F of the Central Excise Act of 1944 was made after the adjustment made by the Finance Act of 2014. As a result, the appellant’s situation falls outside the scope of the new provision’s proviso, and it will be amended Section 35FF, not the previous Section 35FF, that applies to the deposit in question. As a result, the appellant’s situation falls outside the scope of the new provision’s proviso, and it will be amended Section 35FF, not the previous Section 35FF, that applies to the deposit in question. As a result, the refund and interest were properly sanctioned by the original Adjudicating Authority.

The CESTAT also noted that the initial Adjudicating Authority had awarded interest at a rate of 5%. In the modified Section 35FF, this rate is the lowest. The amount in question was not a duty payment, but rather a deposit made under Section 35F in order to exercise the right to appeal. The appeal was successful. Such a sum is almost certain to be reimbursed, together with any necessary consequence relief, such as interest.

The single judge bench directed by the judicial member Rachna Gupta decided that “In the current facts and circumstances, I believe that a rate of twelve percent is an appropriate rate of interest. As a result, the appellant’s request for a lower interest rate is granted. As a result of the foregoing discussion, the order under challenge/Order-in-Appeal is hereby set aside, holding appellant entitled to a refund of the pre-deposit amount plus interest at the rate of 12%. As a result, the appeal is granted.”