Interest rate of 12% applicable on refund of pre-deposit amount under Section 35F of Central Excise Act

The Customs, Excise & Service Tax Appellate Tribunal(CESTAT New Delhi) in the matter of M/s. Elegant Developers Vs. The Commissioner ruled out that Interest rate of 12% applicable on refund of pre-deposit amount under Section 35F of Central Excise Act.

The Petitioner, M/s Elegant Developers, are engaged in Real Estate Agent Services and are registered under Service Tax. Show cause notice bearing No.83 dated 22.04.2010 was issued to the appellants by DGCEI, New Delhi proposing a demand along with interest and the penalty. The said proposal was confirmed by original Adjudicating Authority vide Order No.132 dated 30th September, 2013. However, this Tribunal vide Final Order No.53602-53605/2019 dated 25th June, 2019 has set aside the aforesaid Order-in-Original.

The Coram Found out that, “The amount for which the refund claim was filed by the appellant on 9th December, 2019 was the amount of pre-deposit as was made by the appellant on 6th October, 2015 pursuant to the directions of High Court Order in C.M.No.11263/2015 dated 15.09.2015. This was the amount to be paid as pre-deposit at the time of filing the appeal before this Tribunal against the Order-in-Original No.132 dated 30th September 2013. Hence impugned was an amount as was deposited in terms of Section 35F of Central Excise Act, 1944, the provision which demands deposit of certain percentage of duty demanded or penalty imposed before filing the appeal. This amount of deposit prior to filing of appeal either before Commissioner (Appeals) (7.5%) or before this Tribunal (additional 2.5%) has to be refunded consequent upon the order of respective Appellate Authority in terms of Section 35FF of Central Excise Act. The impugned refund claim was filed after this Tribunal disposed off the appellant’s appeal against the Order-in-Original dated 30th September, 2013. Section 35FF, further, entitles appellant for the interest along with the refund of the amount of pre-deposit. This Section, however, has undergone an amendment vide Finance Act of 2014. The controversy herein is as to whether Section 35FF pre-amendment will be applicable to the present case or Section 35FF post-amendment.”

Coming to the plea of the appellant about the rate of interest, it is observed that original Adjudicating Authority has awarded interest at the rate of five per cent. The said rate is the lowest rate in the amended Section 35FF. The amount in question is not an amount of duty but was an amount paid by way of deposit under Section 35F for availing the remedy of an appeal. The appeal has been allowed. Such an amount is bound to be refunded along with the appropriate consequential relief as that of interest.

The Appellate Tribunal ruled out that, “I draw my support from the decision of Hon’ble High Court, Mumbai in the case of Suvidhe Limited Vs Union of India [1996 (82) ELT 177]. Hon’ble Apex Court also in the case of Pratibha Processors Vs Union of India [1996 (88) ELT 12 (SC)] has held that interest is essentially compensatory in character. The appellant is held to be reasonably compensated for the interest that too from the date of its payment. Further, I observe that the original Adjudicating Authority has given no reason for applying the lowest rate of interest given in amended Section 35FF. Keeping in view the above adjudication, I am of the opinion that the reasonable rate of interest in the given facts and circumstances is the rate at twelve per cent. Hence, the request of the appellant is accepted with respect to rate of interest also. Consequent to the above discussion, the order under challenge/Order-in-Appeal is hereby set aside holding appellant to be entitled for sanction of refund of pre-deposit amount along with interest at the rate of twelve per cent thereof. The appeal accordingly stands allowed.”

The Judgment was made by Hon’ble Mrs. Rachna Gupta.

The Petitioner was represented by Mr. Ayush Agarwal, Advocate and Respondent was represented by Ms. Tamanna Alam.

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