CESTAT Kolkata Grants 12% Interest on Excise Investigation Deposit from Date of Deposit

Bengal Hammer Industries Private Limited Vs Commissioner of Central Tax (CESTAT Kolkata)

Summary: The appellant, M/s. Bengal Hammer Industries Private Limited, was engaged in manufacturing operations and was registered under the Central Excise Act, 1944. During an investigation by the Directorate General of Anti-Evasion (C.Ex.), Calcutta Zonal Unit, the appellant deposited an aggregate amount of Rs.50,00,000/- during July 1996 to February 1997 in connection with an allegation concerning incorrect availment of MODVAT credit. A Show Cause Notice was subsequently issued on 02.05.2000 proposing recovery of Rs.78,91,213/-. After successive adjudication and appellate proceedings, the Tribunal, vide Final Order Nos.75049-75050 of 2020 dated 03.01.2020, set aside the demand and allowed the appeals with consequential benefit. The deposited amount of Rs.50,00,000/- was thereafter refunded on 17.06.2020 without interest. The Commissioner (Appeals) denied interest on the reasoning that the refund claim was filed on 25.02.2020 and the refund was sanctioned within three months, applying Section 11BB of the Central Excise Act, 1944. Before the Tribunal, the appellant contended that the amount was a revenue/investigation deposit and not excise duty, that Sections 11B and 11BB were therefore inapplicable, and that interest at 12% per annum was payable from the respective dates of deposit until refund. The Revenue contended that the refund was made within the statutory period and that the deposit could not be treated as a pre-deposit under Section 35F so as to attract Section 35FF. The Tribunal considered the factual history and the cited decisions concerning interest on investigation-stage deposits and refunds. It held that, after the demand had been set aside and no further challenge by the Revenue was shown, the amounts deposited during investigation lost the character of Excise Duty and remained amounts deposited by the appellant. The Tribunal further held that the absence of a specific statutory provision could not be relied upon to deny interest where the Revenue had retained the appellant’s money without legal entitlement. Following the authorities discussed in the order, the Tribunal held that the appellant was entitled to interest at 12% per annum from the respective dates of deposit until the date of refund. The impugned order was accordingly set aside and the appeal was allowed. The Tribunal also directed that the interest be calculated and paid within eight weeks from receipt of the order. Cases Discussed:

• Ranbaxy Laboratories Ltd. v. Union of India [2012 (27) S.T.R. 193 (S.C.)]
• Sandvik Asia Ltd. v. Commissioner of Income Tax-I, Pune [2007 (8) S.T.R. 193 (S.C.)]
• Parle Agro Pvt. Ltd. v. Commissioner, C.G.S.T., Noida [2022 (380) E.L.T. 219 (Tri.-All.)]
• Riba Textiles Ltd. v. Commissioner of Central Excise and Service Tax, Panchkula [2022 (62) G.S.T.L. 136 (P & H)]
• Churchit International v. Commissioner of Customs (Export), New Delhi [Final Order No. 58537 of 2024]
• Rajendra Kumar Jain v. Commissioner of Customs (Port), Kolkata & Others
• Green Valley Industries
• Commissioner, C.G.S.T. and Central Excise, Indore v. Indore Treasure Market City Pvt. Ltd.

FULL TEXT OF THE ORDER OF CESTAT KOLKATA

The appellant, M/s. Bengal Hammer Industries Private Limited was a registered assessee under the Central Excise Act, 1944 engaged in manufacturing operations and duly registered under the applicable provisions. 2. During the Financial Year 1996–97, the Directorate General of Anti-Evasion (C.Ex.), Calcutta Zonal Unit, conducted an investigation against the appellant, raising an allegation of incorrect availment of MODVAT credit under the provisions of the Act. During the course of the said investigation proceedings, and prior to the issuance of any Show Cause Notice, the appellant had deposited a sum of Rs. 50,00,000/- (Rupees Fifty Lakhs only). 3. On the ground that the appellant is not eligible for the MODVAT Credit to the extent of Rs.78,91,213/-, taken during the period from 01.04.1995 to 28.01.1996, a Show Cause Notice came to be issued on 02.05.2000. Vide Order-in-Original dated 28.01.2004, the adjudicating authority had confirmed the demand. Being aggrieved, the appellant filed their appeal before the Tribunal, whereupon the matter was remanded to the adjudicating authority. Thereafter, vide Order-in-Original dated 04.01.2010, the demand came to be confirmed by the adjudicating authority. Against the said order, the appellant filed an appeal before the Tribunal, whereafter, vide Final Order Nos. 75049–75050 of 2020 dated 03.01.2020, the Tribunal set aside the demand and allowed the appeals. 3.1. Consequent to this Final Order, the appellant sought refund of the amount deposited during the course of investigation. The actual amount, of deposit of Rs.50,00,000/- made by the appellant, has been refunded vide Order-in-Original No. 02/R/Refund/Bally-I/2020-2021 dated 17.06.2020. 3.2. Being aggrieved by the fact no interest was granted for this amount of Rs.50,00,000/-, the appellant filed their appeal before the Commissioner (Appeals), which came to be dismissed by him vide the impugned order dated 18.02.2021, on the ground that interest is payable only for the delayed period, i.e., after the expiry of 3 months from the date of filing of the refund claim whereas in this case, the refund was granted within the specified time. 4. Being aggrieved, the appellant is before the Tribunal. 5. The appellant’s Miscellaneous Petition for Early Hearing was dismissed by this Bench on 19.04.2024. The appellant challenged same before the Hon’ble Calcutta High Court vide revisional application under C.O. No.2581 of 2024. The Hon’ble Calcutta High Court vide its Order dated 28.01.2026, directed the Tribunal to dispose of the appeal expeditiously, preferably within three months from the date of communication of the said order. The appellant communicated the same to the Registry on 09.04.2026. Adhering to the directions of the Hon’ble Calcutta High Court, the appeal was taken up on 12.05.2026 for Hearing. The Orders were reserved on that date. However, as the Member (Technical) was on Tour and was also availing Medical Leaves, the Order could not be pronounced before he retired on 02.08.2026. Therefore, the Appeal has been re-listed on 02.09.2026 and the matter was heard from both the sides. 6. The Ld. Chartered Accountant appearing on behalf of the appellant gives the chronological details as per the following table: –

Date	Events
July 10, 1996	Search was conducted on various premises of Bengal Hammer Industries Private Limited by Directorate General of Anti Evasion (C.Ex), Calcutta Zonal Unit.
July 27, 1996 to February 01, 1997	The Company deposited various amounts with the Department in following manner- Date Cheque/Pay Order No. Amount (in Rs.) 27.07.1996 661833 15,00,000 20.08.1996 068132 15,00,000 28.09.1996 784880 15,00,000 02.01.1997 784929 2,50,000 01.02.1997 807308 2,50,000 Total 50,00,000
January 3, 2020	The Regional Bench of the Customs, Excise and Service Tax Appellate Tribunal, Kolkata passed Final Order No. 75049-75050/2020 concluding investigation matter relating to alleged incorrect availment of MODVAT credit in favour of the Company and allowed the MODVAT credit.
February 25, 2020	The Company applied for refund of excise duty deposited under protest of Rs. 50 lakhs in Form-R.
June 17, 2020	The Assistant Commissioner of Central Tax, Bally-I Division, Howrah CGST & CX Commissionerate passed Order-in-Original No. 02/R/Refund/Bally-I/2020-2021 sanctioning refund of excise duties paid of Rs. 50,00,000/- without any interest.
July 3, 2020	The Company submitted a letter to the Adjudicating Authority requesting for grant and sanction of interest on refund of Rs. 50,00,000/-.
September 29, 2020	The Company filed appeal in Form E.A.-I against the refund order for Rs. 50,00,000/-, asking for grant and sanction of interest on such deposit refunded, before the Commissioner (Appeals-II).
February 18, 2021	The Commissioner, CGST & Central Excise (Appeal-II), Kolkata passed Order-in-Appeal No. 78/HWH/CE/2020-21 sanctioning interest under Section 11BB of the Act after expiry of 3 months from the date of receipt of order dated 3rdJanuary 2020.
April 16, 2021	The Company filed appeal in Form E.A.-3 against order-in-appeal granting interest on refund of duty deposited.
September 01, 2023	An application seeking expeditious hearing was filed vide E.H. Application No. 75729 of 2023 in Excise Appeal No. 75432 of 2021 (Bengal Hammer Industries vs Commissioner of Central Excise, Howrah).
December 12, 2023	Hearing for the appeal proceedings was scheduled.
December 14, 2023	The scheduled hearing was held on 14thDecember 2023 before Member (Judicial) of the Regional Bench- Court No. 1. However, as the dispute is regarding payment of interest on deposit, whereby the interest amount exceeds Rs. 50.0 lakhs, the Single Member Bench refrained from hearing the appeal and referred the matter to the Division Bench. Therefore, the final judgment was not passed on the dispute and the matter was referred to Divisional Bench.
March 13, 2024	An application seeking expeditious hearing was filed vide E.H. Application No. 75146 of 2024 in Excise Appeal No. 75432 of 2021 (Bengal Hammer Industries vs Commissioner of Central Excise, Howrah).
April 19, 2024	The application was rejected by Order dated 19.04.2024 passed by the Division Bench of the CESTAT, Kolkata.
July 18, 2024	Aggrieved, the Appellant filed a revisional application against the above order, before the Civil Revisional Jurisdiction, High Court of Calcutta, registered as C.O. No. 2581 of 2024.
January 28, 2026	The said revisional application was allowed vide order, wherein it has been specifically directed that the CESTAT, Eastern Zonal Bench, Kolkata shall dispose of the appeal expeditiously, preferably within three months from the date of communication of the said order.
April 9, 2026	The authorised representative of the Company submitted a letter along with a copy of the original order passed by the Hon’ble High Court of Calcutta, to the Asst Registrar, CESTAT Kolkata, to seek a hearing date for the closure of such appeal proceedings.

6.1. He submits that issue in the present appeal is narrow and well-defined. It is pointed out that the refund of the principal sum of Rs. 50,00,000/- is not in dispute and that the same has already been received by the appellant pursuant to the Order-in- Original dated 17th June, 2020. It is submitted that the sole questions for adjudication before this Tribunal are:

(i) From what date is the appellant entitled to interest on the deposited amount of Rs. 50,00,000/-; and

(ii) At what rate is such interest payable.

6.2. The appellant respectfully submits that they are entitled to interest at the rate of 12% per annum from the respective date of each deposit till the date of actual refund, as has consistently been held by this Tribunal and the Hon’ble Supreme Court of India in a catena of decisions, including the decision of this very Bench in M/s. Green Valley Industries Limited vs. Commissioner of CGST & CX, Shillong Commissionerate [Excise Appeal No. 75724 of 2021, Final Order No. 75189/2022 dated 11th April, 2022]. 6.3. The appellant further draws attention to the fact that Section 35FF did not exist in the statute prior to its introduction on 10th May, 2008; that during this period, there was no statutory provision governing the rate or commencement of interest on refund of amounts deposited during investigation or adjudication proceedings. It is submitted that in the absence of such provision, the Hon’ble Supreme Court of India, in Commissioner of Central Excise v. ITC Limited (decided on 2nd December, 2004), recognised the right of an assessee to receive interest at 12% per annum on amounts wrongly retained by the State from the date of such retention. 6.4. It has been submitted by the appellant that the Commissioner (Appeals) has committed a fundamental error of law by applying Section 11BB — which is the rate provision under the pre-amendment Section 35FF — to the appellant’s deposits of 1996– 97; that the Impugned Order is accordingly unsustainable in law and is liable to be set aside. 6.5. The appellant further submits that the impugned order proceeds on the basis that interest is payable under Section 11BB of the Act, which provides for interest on delayed refund of duty ordered under Section 11B(2); however, this approach is wholly erroneous in law, since the pre-deposit made during investigation is not a payment of duty; that it is a deposit of a sum held by the Department in a custodial capacity, pending adjudication. It is mentioned that the Board’s own Circular No. 984/08/2014-CX dated 16th September, 2014 expressly clarifies at paragraph 5.2 thereof: =

“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.”

6.6. It is the case of the appellant that the statutory scheme under the Act is clear – Section 11B deals with claims for refund of duty and interest paid on such duty; that Section 11BB provides for interest on amounts that are ordered to be refunded under Section 11B(2) but are not refunded within three months of the application. It is submitted that since the present case does not involve a claim for refund of duty, but a claim for refund of a pre-deposit / investigation deposit, the provisions of Section 11B are altogether inapplicable; it follows, as a necessary corollary, that Section 11BB is equally inapplicable. 6.7. In this regard, the appellant placed reliance on the decision of the Tribunal in M/s. Parle Agro Pvt. Ltd. vs. Commissioner, CGST, Noida [Excise Appeal No. 70628 of 2019, Final Order No. 70180-70181/2021 dated 25th May, 2021] wherein it has been specifically held, at paragraphs 30 and 33, that Section 11B has no application to refund of revenue deposits, and that “there is no provision in the Excise Act, which deals with refund of revenue deposit and so rate of interest has not been prescribed, when revenue deposit is required to be refunded.”; in the absence of any applicable statutory rate, the Tribunal applied the rate of 12% per annum, being the mean of the rates under the various applicable notifications. 6.8. Further, in addition to M/s. Green Valley Industries Limited (supra), the following decisions of the Hon’ble Supreme Court, the Hon’ble High Courts, and various Benches of this Tribunal have been relied upon by the appellant in support of its claim for interest at 12% per annum from the date of each deposit:

(i) Sandvik Asia Ltd. vs. Commissioner of Income Tax- I, Pune [2006 (196) ELT 257 (SC)]: The Hon’ble Supreme Court held that interest is payable on amounts retained by the State to which it has no legitimate claim, recognising the foundational right of an assessee to compensation for the period of retention of amounts that were not liable to be deposited. This decision has consistently been applied by multiple Benches of this Tribunal to investigation-stage deposits.

(ii) Parle Agro Pvt. Ltd. vs. Commissioner, CGST, Noida [Excise Appeal No. 70628 of 2019, Final Order No. 70180-70181/2021 dated 25th May, 2021]: The Tribunal conducted a detailed analysis of all relevant interest provisions under the Act (Sections 11AA, 11BB, 11DD, and 11AB) and held that interest at 12% per annum is the appropriate rate for refund of revenue deposits, being the mean of the rates under the various applicable notifications. The Tribunal further held that Section 11B and Section 11BB have no application to refund of investigation-stage deposits.

(iii) Riba Textiles Ltd. vs. Commissioner of Central Excise and Service Tax, Panchkula [Excise Appeal No. 60446 of 2018, CESTAT Chandigarh; also reported as 2020-TIOL-932-CESTAT-CHD]: The facts in this case are of particular significance. The deposits therein were made during investigation proceedings conducted by the DGCEI, prior to the introduction of Section 35FF on 10th May, 2008. The CESTAT, Chandigarh held expressly that “… the appellant is entitled to claim the interest on delayed refund from the date of deposit till its realization.” This decision is directly applicable to the present case, where the deposits were made in FY 1996–97, well before the enactment of Section 35FF.

(iv) Commissioner, C.G.S.T. and Central Excise, Indore Vs Indore Treasure Market City Pvt. Ltd. [(2024) 20 Centax 470 (M.P.)]

(v) Principal Commissioner of C.G.S.T. Vs Green Valley Industries Pvt. Ltd. [(2023) 10 Centax 117 (Meghalaya)]

(vi) Berger Paints India Ltd. Vs Commissioner of Customs, Kolkata [Final Order No.75927/2026 dated 22.07.2026]

(vii) Atcorp Global Pvt. Ltd. v. Commissioner of Customs (Port), Kolkata [Final Order No. 76080- 76081/2026 dated 18.08.2026]

6.9. It is submitted that the above decisions constitute a settled and consistent line of authority from which there is no reason to depart and thus the legal position is no longer res integra; that therefore the appellant’s entitlement to interest at 12% per annum from the date of each deposit is well- established and ought to be affirmed by this Tribunal. 7. In view of the above submissions, the Ld. Chartered Accountant appearing on behalf of the appellant prays that the interest may be granted for the amounts deposited, from the date of their deposit till the date the same was paid/refunded vide the Order-in-Original dated 17.06.2020. In this regard, it is further submitted by the appellant that on this interest which was payable on 17.06.2020 itself, further interest payment may be ordered, since the appellant has been deprived of the said interest from 17.06.2020 till now. Accordingly, it is prayed the appeal may be allowed on these terms. 8. The Ld. Authorized Representative of the Revenue appearing before us submits that the appellant has admittedly filed their Refund claim on 25th February, 2020 and consequently, the refund has been granted within the specified time; that the amounts cannot be treated as pre-deposit in terms of Section 35F so as to enable the appellant to claim the interest under Section 35FF. He has also made written submissions to this effect. Therefore, he justifies the order of the lower appellate authority and prays that the appeal be dismissed. 9. Heard both the sides and perused the appeal papers. 10. Admittedly, in this case, an investigation was taken up by the Revenue officials by visiting the premises of the appellant. The Revenue took the view that the appellant was availing MODVAT Credit, for which they were ineligible. In the course of investigation, the appellant paid the following amounts:

(i) Rs. 15,00,000/- vide Cheque No. 661833 dated 27th July, 1996;

(ii) Rs. 15,00,000/- vide Cheque No. 068132 dated 20th August, 1996;

(iii) Rs. 15,00,000/- vide Cheque No. 784880 dated 28th September, 1996;

(iv) Rs. 2,50,000/- vide Cheque No. 784929 dated 02nd January, 1997; and

(v) Rs. 2,50,000/- vide Cheque No. 807308 dated 01st February, 1997, aggregating to Rs. 50,00,000/-.

11. Even as the amounts were deposited between July 1996 to February 1997, the Show Cause Notice finally came to be issued only on 02.05.2000, i.e. after about 3 to 4 years after the amounts were deposited by the appellant. In the second round of litigation, this Tribunal vide Final Order Nos.75049-75050 of 2020 dated 3rd January, 2020, set aside the said impugned order and allowed the appeal, holding as under: –

“17. We have gone through the facts of the case and perused the appeal record. It is apparent from the impugned order that the Learned Adjudicating Authority, in respect of specific direction from this Tribunal, failed to adhere to the remand direction regarding consideration of submission made by the appellant and also the legal provisions. We find that this Tribunal in case of M/s. Vindhya Steel, who happened to be one of the supplier of the input material, has set aside the order. An appeal against that order was also sustained by Hon’ble High Court of Kolkata. In the circumstances, we find that no charge against the appellant would sustain and the impugned order is bad in law.

18. We also find that the appellant had been submitting the document such as RG23A part (1) and RG23 part (2) alongwith the invoices on which modvat credits had been taken alongwith monthly RT-12 reports. The duty paying documents has also been defaced by the departmental officers while assessing RT-12 return of the appellant unit. In such a circumstance there is no scope of invocation of extended period of limitation, which has been done in this case. The show cause notice has been issued on 02.05.2000 for the period 01.04.1995 to 28.01.1996. The demand is therefore time bared and not sustainable at all.

….

21. We therefore set aside the impugned order and allow the appeals filed by both the appellants with consequential benefit as per law.”

12. From the above factual details, we find that first of all, the Revenue was sitting with the deposits made during 1996-1997 till February 2020, without even issuing the Show Cause Notice. After this, the Show Cause Notice was issued and the demand was confirmed. The Tribunal, remanded the matter back to the adjudicating authority to pass the order as per the directions given. The adjudicating authority has however confirmed the demand. On Appeal, this Bench at Paragraph 17 of its Order dated 3rd January, 2020 reproduced supra, has specifically noted that “It is apparent from the impugned order that the Learned Adjudicating authority, in respect of specific direction from the Tribunal, failed to adhere to the remand direction regarding consideration of submission made by the appellant’. The impugned order in question was set aside and the appeal was allowed ‘with consequential’ benefit as per law. 12.1. No factual details are emerging to the effect that this Final Order dated 3rd January, 2020 was further agitated by the Revenue before the High Court / Supreme Court. 12.2. This view also gets fortified by the fact that the refund of the deposited amount has been granted vide Order-in-Original dated 17th June, 2020, which has not been challenged by the Revenue. The Revenue has refunded the basic amount of Rs.50,00,000 on 17th June, 2020 and has not paid any interest for the intervening period i.e., 1996 to 2020 on the ground the appellant has filed the refund claim on 25.02.2020 [Para 5.2 of the OIA]. Applying the provisions of Section 11BB it was held that the refund has been granted within the specified time limit of 3 months; the Commissioner (Appeals) in the impugned order has accordingly held that no interest is required to be paid to the appellant. 13. From the factual details discussed above, it is evident that the MODVAT Credit taken by the appellant was disputed by the Revenue and in the course of investigation, Rs.50,00,000/- has been paid by the appellant by way of cheques / challans during 1996 – 1997, much before even the issue of the Show Cause Notice on 02.05.2000. After two rounds of litigation, finally it was held by the Tribunal vide the Final Order dated 3rd January, 2020 that the appellant was entitled for the said amount of MODVAT Credit. The impugned order in question was therefore set aside and the appeal was allowed along with ‘consequential benefit’. No further appeal was filed by the Revenue against this Final Order. The net conclusion in the Order is that, the issue as to whether the appellant is eligible or not for the MODVAT Credit in question has been effectively held in favour of the appellant. This shows that the appellant was correct from day one when they have taken the credit. It also shows that from day one of the investigation, the Revenue was not entitled for even a single rupee of the amount which was deposited by the appellant. Effectively for the entire amount of Rs.50,00,000/- paid by the appellant in 1996-1997, the Revenue had absolutely no legal claim at all, from that day onwards. The impugned Order-in-Appeal shows that the Revenue believes that they are entitled to enjoy this Rs.50,00,000/- from 1996-1997 till 02.05.2020, when the Refund was filed by the appellant consequent to the Tribunal’s order. Nothing can be more erroneous than this perception. Once the Tribunal sets aside the demand, the amount deposited by the appellant ceases to be Excise Duty and is to be held only as amount deposited by them. So far as the excuse of the Revenue that the appellant has filed their refund claim under Form R, this cannot be used as a weapon. The appellant has deposited the same as Excise Duty in 1996-1997 purely upon the insistence of the Revenue. He has contested the same all along till the issue came to be decided in January, 2020. Hence, it is clear that this is was not any voluntary payment on his part. Naturally, if the Revenue wants the appellant to seek the refund, they would follow the Form R from their side. Mere filing of Form R itself cannot give the colour of Excise Duty, to enable the Revenue to deny interest payments to the appellant. Therefore, we hold that the denial of the interest on the ground that Section 11BB provisions were followed, is not legal and we set aside the impugned order on this ground. 14. Another indirect reference made by the Revenue is to the effect that there exists no provision to pay the interest this case. Admittedly, there was no statutory provision available for claiming the interest for the deposits made in 1996-1997. But we are also bound to take cognizance of the decisions of Supreme Court and High Courts in such cases. It would therefore be pertinent to go through some of the important judgements on the issue as to from which date the interest would accrue. We have for reference the following case laws:

• Ranbaxy Laboratories Ltd. v. Union of India [2012 (27) S.T.R. 193 (S.C.)] [21-10-2011]

“The challenge in this batch of appeals is to the final judgments and orders delivered by the High Court of Delhi in W.P. No. 13940/2009 and the High Court of Judicature at Bombay in Central Excise Appeal Nos. 163/2007 [2008 (229) E.L.T. 498 (Bom.)] and 124 of 2008. The core issue which confronts us in all these appeals relates to the question of commencement of the period for the purpose of payment of interest, on delayed refunds, in terms of Section 11BB of the Central Excise Act, 1944 (for short “the Act”). In short, the question is whether the liability of the revenue to pay interest under Section 11BB of the Act commences from the date of expiry of three months from the date of receipt of application for refund or on the expiry of the said period from the date on which the order of refund is made?

…..

14. At this stage, reference may be made to the decision of this Court in Shreeji Colour Chem Industries (supra), relied upon by the Delhi High Court. It is evident from a bare reading of the decision that insofar as the reckoning of the period for the purpose of payment of interest under Section 11BB of the Act is concerned, emphasis has been laid on the date of receipt of application for refund. In that case, having noted that application by the assessee requesting for refund, was filed before the Assistant Commissioner on 12th January 2004, the Court directed payment of Statutory interest under the said Section from 12th April 2004 i.e. after the expiry of a period of three months from the date of receipt of the application. Thus, the said decision is of no avail to the revenue.

15. In view of the above analysis, our answer to the question formulated in para (1) supra is that the liability of the revenue to pay interest under Section 11BB of the Act commences from the date of expiry of three months from the date of receipt of application for refund under Section 11B(1) of the Act and not on the expiry of the said period from the date on which order of refund is made.

16. As a sequitur, C.A. No. 6823 of 2010, filed by the assessee is allowed and C.A. Nos. 7637/2009 and 3088/2010, preferred by the revenue are dismissed. The jurisdictional Excise officers shall now determine the amount of interest payable to the assessees in these appeals, under Section 11BB of the Act, on the basis of the legal position, explained above. The amount(s), if any, so worked out, shall be paid within eight weeks from today.” [Emphasis supplied]

• Sandvik Asia Ltd. V. Commissioner of Income Tax-I, Pune [2007 (8) S.T.R. 193 (S.C.)] [Civil Appeal Nos. 1337-1340 of 2005 decided on 27.01.2006]

The Hon’ble Supreme Court framed the following questions:

“A. Whether in view of binding decisions of this Court the respondents are estopped from urging that compensation as claimed by the appellant is not payable by them? And therefore whether the Bombay High Court erred in allowing them to urge such a contention in the impugned judgment? B. Assuming for the sake of argument that there is no provision in the Income-tax Act, 1961 (“the Act”) for grant of such compensation, this Court had upheld the view of the Gujarat & Madhya Pradesh High Courts that compensation should be granted (whether called interest or otherwise) and hence the impugned judgment was contrary to a decision of this Court and ought to be reversed? …

E. Whether the High Court ought to have held that sections 240 and 244 of the Act refer to ‘refund of any amount’, which phrase clearly includes any amount (including interest) due by the Income Tax department to the assessee, and hence the appellant was entitled to interest on the delay in the payment of amounts due from the Income- tax department ?”

Provisions of Income Tax Act:

“243. Interest on delayed refunds.

(1) If the Income-tax Officer does not grant the refund

(a) in any case where the total income of the assessee does not consist solely of income from interest on securities or dividend, within three months from the end of the month in which the total income is determined under this Act, and

(b) in any other case, within three months from the end of the month in which the claim for refund is made under this Chapter, the Central Government shall pay the assessee simple interest at (twelve) per cent per annum on the amount directed to be refunded from the date immediately following the expiry of the period of three months aforesaid to the date of the order granting the refund.

Explanation: If the delay in granting the refund within the period of three months aforesaid is attributable to the assessee, whether wholly or in part, the period of the delay attributable to him shall be excluded from the period for which interest is payable.

244. Interest on refund where no claim is needed. (1) Where a refund is due to the assessee in pursuance of an order referred to in section 240 and the Income-tax Officer does not grant the refund within a period of [three months from the end of the month in which such order is passed], the Central Government shall pay to the assessee simple interest at [twelve] per cent per annum on the amount of refund due from the date immediately following the expiry of the period of [three] months aforesaid to the date on which the refund is granted.”

….

“17. We have given our anxious and thoughtful consideration on the elaborate submissions made by counsel appearing on either side. In our opinion, the High Court has failed to notice that in view of the express provisions of the Act an assessee is entitled to compensation by way of interest on the delay in the payment of amounts lawfully due to the appellant which were withheld wrongly and contrary to the law by the Department for an inordinate long period of up to 17 years.

.

.

.

28. In our view, there is no question of the delay being ‘justifiable’ as is argued and in any event if the revenue takes an erroneous view of the law, that cannot mean that the withholding of monies is ‘justifiable’ or ‘not wrongful’. There is no exception to the principle laid down for an allegedly ‘justifiable’ withholding, and even if there was, 17 (or 12) years delay has not been and cannot in the circumstances be justified.

…

30. At the initial stage of any proceedings under the Act any refund will depend on whether any tax has been paid by an assessee in excess of tax actually payable to him and it is for this reason that Section 237 of the Act is phrased in terms of tax paid in excess of amounts properly chargeable. It is, however, of importance to appreciate that section 240 of the Act, which provides for refund by the Revenue on appeal etc., deals with all subsequent stages of proceedings and therefore is phrased in terms of ‘any amount’ becoming due to an assessee.

…

45. The facts and the law referred to in paragraph (supra) would clearly go to show that the appellant was undisputably entitled to interest under Sections 214 and 244 of the Act as held by the various High Courts and also of this Court. In the instant case, the appellant’s money had been unjustifiably withheld by the Department for 17 years without any rhyme or reason. The interest was paid only at the instance and the intervention of this Court in Civil Appeal No. 1887 of 1992 dated 30.04.1997. Interest on delayed payment of refund was not paid to the appellant on 27.03.1981 and 30.04.1986 due to the erroneous view that had been taken by the officials of the respondents. Interest on refund was granted to the appellant after a substantial lapse of time and hence it should be entitled to compensation for this period of delay. …

…..It is a case of the appellant as set out above in the instant case for the assessment year 1978- 79, it has been deprived of an amount of Rs.40 lakhs for no fault of its own and exclusively because of the admittedly unlawful actions of the Income Tax Department for periods ranging up to 17 years without any compensation whatsoever from the Department. Such actions and consequences, in our opinion, seriously affected the administration of justice and the rule of law.

…

47. There cannot be any doubt that the award of interest on the refunded amount is as per the statute provisions of law as it then stood and on the peculiar facts and circumstances 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.

48. This is the fit and proper case in which action should be initiated against all the officers concerned who were all in charge of this case at the appropriate and relevant point of time and because of whose inaction the appellant was made to suffer both financially and mentally, even though the amount was liable to be refunded in the year 1986 and even prior to. A copy of this judgment will be forwarded to the Hon’ble Minister for Finance for his perusal and further appropriate action against the erring officials on whose lethargic and adamant attitude the Department has to suffer financially.”

• Union of India v. Hamdard (Waqf) Laboratories [2016 (333) E.L.T. 193 (S.C.)]

“9. Presently to the flash back. In pursuance of the order passed by the competent authority, an amount of Rs. 3,74,00,000/- was refunded by cheque No. 639266 dated 15-11-2000 payable at PNB Navyug Market, Ghaziabad. As no interest was paid by the appellant, the respondent filed a Civil Miscellaneous Writ Petition No. 249 of 2001 before the High Court of Judicature at Allahabad [2005 (188) E.L.T. 476 (All.)]. The Division Bench, considered the judgment rendered by this Court in Civil Appeal No. 7766 of 1995, took note of the time prescribed for disposal of the application for refund, the language employed in Section 11BB of the Central Excise Act, 1944 (for short, ‘the Act’) and further appreciating the conduct of the parties, opined that the liability for payment of interest is statutory and it is the bounden duty of the Assistant Commissioner to pay interest from 26th November, 1999 till 15th November, 2000 at the rate specified under Section 11BB of the Act. The aforesaid conclusion impelled the Division Bench to allow the writ petition with costs which was assessed at Rs. 10,000/-. The said order is the subject matter of appeal by special leave.

.

.

.

17. The seminal issue is be whether there has been delay in grant of refund and consequently, whether the respondent-assessee is entitled to interest. Keeping in view the enumerated facts, the submissions canvassed and the provisions referred to, it is necessary to appreciate the principle stated in Ranbaxy Laboratories Limited (supra). In the said case, the question arose whether the liability of the Revenue to pay interest under Section 11BB of the Act commences from the date of expiry of three months from the date of receipt of application for refund or on the expiry of the said period from the date on which the order of refund is made…. ….

21. As far the said principles are concerned, they are binding on us. But the facts in the case at hand are quite different. It is not a case where the assessee is claiming automatic refund. It is a case that pertains to grant of interest where the refund has been granted. The grievance pertains to delineation by the competent authority in a procrastinated manner. In our considered opinion, the principle laid down in Ranbaxy Laboratories Limited (supra) would apply on all fours to the case at hand. It is obligatory on the part of the Revenue to intimate the assessee to remove the deficiencies in the application within two days and, in any if there are still deficiencies, it can proceed with adjudication and reject the application for refund. The adjudicatory process by no stretch of imagination can be carried on beyond three months. It is required to be concluded within three months. The decision in Ranbaxy Laboratories Limited (supra) commends us and we respectfully concur with the same.”

[Emphasis supplied]

• Commissioner, CGST and Central Excise, Indore v. Indore Treasure Market City Pvt. Ltd. [2016 (333) E.L.T. 193 (S.C.)]

“9. The learned CESTAT has decided appeal so filed, vide impugned Final Order No. 50125/2024 dated 11-1-2024 wherein learned CESTAT has allowed the appeal and held that respondent is entitled for the interest on the amount of refund sanctioned at the rate of 12% to be calculated from the date of payment till the date of disbursement.

….

11. Learned counsel for the appellant contended that the learned CESTAT has erred in coming to the conclusion that the refund claimed by the respondent is governed under section 11 B and 11 BB of Central Excise Act, 1944 (which shall be referred hereinafter as “Act, 1944”), whereas the aforesaid provisions governs such refund of duty amount. In fact the Tribunal failed to consider that such refund is governed under section 11 B of the Act, 1944, since it pertained to refund of duty amount paid by the respondent in compliance of an order of Adjudicating Authority. So also the interest on delay payment of refund is governed by Section 11 B of the Act, 1944. He submits that learned Tribunal has misinterpreted the Apex Court ruling in case of Mafatial Industries Ltd. v. Union of India 1997 (89) EL.T. 247 (S.C.) as well as in the case of Sandvik Asia Ltd v. Commissioner of Income Tax-l, Pune & Ors. AIR 2006 SUPREME COURT 1223 = 2007 (8) ST.R 193 (S.C.). Learned CESTAT also erred in granting interest @ 12% P.A., since the finding is based without any legal provisions.

12. Learned senior counsel for the respondent and counsel for the intervenor have opposed the prayer and submitted that no substantial question of law arises for adjudication in this appeal. They relied upon the judgment of High Court of Meghalaya at Shillong in the case of The Principal Commissioner of Central Goods and Service Tax v. M/s Green Valley Industries Pvt. Ltd. MC (Central Excise Ap.) No. 1/2023 dated 26/07/2023 [(2023) 10 Centax 117 (Meghalaya)] wherein similar issue has cropped-up and the Court has dismissed the appeal of Revenue. He further relied on the judgment of High Court of Punjab and Haryana at Chandigarh in case of Commissioner of Central Excise, Panchkula v. M/s Riba Textiles Limited CEA No. 8 of 2022 (O&M) dated 14/03/2022 = 2022 (62) G.S.T.L. 136 (PH) wherein also similar issue was raised by the Revenue, has been dismissed. They also submitted that the learned Tribunal has rightly come to the conclusion, therefore, the appeal deserves to be dismissed.

…

14. In view of the aforesaid discussions and the rival submissions made by learned counsel for the parties, the issues raised in the present appeal is covered by the judgments in the case of M/s Green Valley Industries Pvt. Ltd. (supra) and M/s Riba Textiles Ltd. (supra), therefore, this Court is of the considered opinion that no substantial question of law arises for consideration in the present appeal. The appeal sans merit and is hereby dismissed.” [Emphasis supplied]

• Principal Commissioner of Central Goods and Service Tax v. Green Valliey Industries Pvt. Ltd. [(2023) 10 Centax 117 (Meghalaya)]

“8. In course of the appeal before the CESTAT, several judgments were looked into. By the order impugned dated April 11, 2022, the Tribunal recorded its satisfaction that the refund in this case was not of any duty or interest on duty. Accordingly, the Tribunal found that the assessee was entitled to interest. On the quantum of interest, the Tribunal relied on several Supreme Court, High Court and its own judgments to arrive at a figure of 12 per cent per annum.

…

11. The Tribunal has given adequate reasons in both the orders impugned, including the order by which the Department’s application for correction or modification was rejected. According to the Tribunal, the deposit was made at a time when no quantified claim had been made on the assessee. On such basis, the Tribunal found that the deposit had not been made on account of any duty or interest which would attract the implied bar under section 118 of the Act. It was a puut sible view taken on the set of facts that presented themselves before the Tribunal and, in this appellate jurisdiction. This interpretation does not call for any interference. Further, as to the quantum of interest awarded, the Tribunal, which is specialised body dealing in matters pertaining to excise duty, took into account the previous judgments of the Supreme Court, High Courts and the Tribunal itself to justify that the rate of 12 per cent per annum would apply in the facts of the present case. Again, since there is some basis to the award of interest by the Appellate Tribunal, the same does not call for any interdiction.”

[Emphasis supplied]

▪ Commissioner of Central Excise, Panchkula v. Riba textiles Ltd. [2022 (62) G.S.T.L. 136 (P & H)]

“9. While deciding the issue of interest, Ld. Tribunal has relied upon the law laid down by the Apex Court in Sandvik Asia Ltd. v. CIT, Pune – 2007 (8) S.T.R. 193 (S.C.) wherein it was held that :-

“45. The facts and the law referred to in paragraph (supra) would clearly go to show that the appellant was undisputably entitled to interest under Sections 214 and 244 of the Act as held by the various High Courts and also of this Court. In the instant case, the appellant’s money had been unjustifiably withheld by the Department for 17 years without any rhyme or reason. The interest was paid only at the instance and the intervention of this Court in Civil Appeal No. 1887 of 1992, dated 30-4- 1997. Interest on delayed payment of refund was not paid to the appellant on 27-3-1981 and 30-4-1986 due to the erroneous view that had been taken by the officials of the respondents. Interest on refund was granted to the appellant after a substantial lapse of time and hence it should be entitled to compensation for this period of delay. The High Court has failed to appreciate that while charging interest from the assessee, the Department first adjusts the amount paid towards interest so that the principal amount of tax payable remain outstanding and they are entitled to charge interest till the entire outstanding is paid. But when it comes to granting of interest on refund of taxes, the refunds are first adjusted towards the taxes and then the balance towards interest. Hence as per the stand that the Department takes they are liable to pay interest only upto the date of refund of tax while they take the benefit of assessee’s funds by delaying the payment of interest on refunds without incurring any further liability to pay interest. This stand taken by the respondents is discriminatory in nature and thereby causing great prejudice to the lakhs and lakhs of assessees. Very large number of assessees are adversely affected inasmuch as the Income Tax Department can now simply refuse to pay to the assessees amounts of interest lawfully and admittedly due to that as has happened in the instant case. It is a case of the appellant as set out above in the instant case for the assessment year 1978-79, it has been deprived of an amount of Rs. 40 lakhs for no fault of its own and exclusively because of the admittedly unlawful actions of the Income Tax Department for periods ranging up to 17 years without any compensation whatsoever from the Department. Such actions and consequences, in our opinion, seriously affected the administration of justice and the rule of law. COMPENSATION:

46. The word ‘Compensation’ has been defined in P. Ramanatha Aiyar’s Advanced Law Lexicon 3rd Edition 2005 page 918 as follows: “An act which a Court orders to be done, or money which a Court orders to be paid, by a person whose acts or omissions have caused loss or injury to another in order that thereby the person damnified may receive equal value for his loss, or be made whole in respect of his injury; the consideration or price of a privilege purchased; something given or obtained as an equivalent; the rendering of an equivalent in value or amount; an equivalent given for property taken or for an injury done to another; the giving back an equivalent in either money which is but the measure of value, or in actual value otherwise conferred; a recompense in value; a recompense given for a thing received recompense for the whole injury suffered; remuneration or satisfaction for injury or damage of every description; remuneration for loss of time, necessary expenditures, and for permanent disability if such be the result; remuneration for the injury directly and proximately caused by a breach of contract or duty; remuneration or wages given to an employee or officer.”

47. There cannot be any doubt that the award of interest on the refunded amount is as per the statute provisions of law as it then stood and on the peculiar facts and circumstances 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.

48. This is the fit and proper case in which action should be initiated against all the officers concerned who were all in charge of this case at the appropriate and relevant point of time and because of whose inaction the appellant was made to suffer both financially and mentally, even though the amount was liable to be refunded in the year 1986 and even prior to. A copy of this judgment will be forwarded to the Hon’ble Minister for Finance for his perusal and further appropriate action against the erring officials on whose lethargic and adamant attitude the Department has to suffer financially.

49. By allowing this appeal, the Income-tax Department would have to pay a huge sum of money by way of compensation at the rate specified in the Act, varying from 12% to 15% which would be on the high side. Though, we hold that the Department is solely responsible for the delayed payment, we feel that the interest of justice would be amply met if we order payment of simple interest @ 9% p.a. from the date it became payable till the date it is actually paid. Even though the appellant is entitled to interest prior to 31-3-1986, Learned Counsel for the appellant fairly restricted his claim towards interest from 31-3-1986 to 27-3-1998 on which date a sum of Rs. 40,84,906/- was refunded.

50. The assessment years in question in the four appeals are the assessment years 1977-78, 1978-79, 1981-82 and 1982-83. Already the matter was pending for more than two decades. We, therefore, direct the respondents herein to pay the interest on Rs. 40,84,906 (rounded ofto Rs. 40,84,900) simple interest @ 9% p.a. from 31-3-1986 to 27-3-1998 within one month from today failing which the Department shall pay the penal interest @ 15% p.a. for the above said period.”

9. It is not disputed that the provisions of Income-tax Act, 1961 and Central Excise Act, 1944 are pari materia and, therefore, law laid down by the Supreme Court in the case of Sandvik Asia Ltd. (supra) shall be applicable to the present case.

10. Ld. Counsel for the appellant is not in a position to deny the proposition of law laid down in the case of Sandvik Asia Ltd. (supra) and the applicability thereof to the facts of the present case.”

[Emphasis supplied]

▪ Parle Agro Pvt. Ltd. v. Commissioner, C.G.S.T., Noida [2022 (380) E.L.T. 219 (Tri. – All.)]

“20. This submission of Learned Counsel for the appellant deserves to be accepted. Once a finding was recorded by the Tribunal in the order dated 31-1-2017 that the amount which had been deposited by the appellant during investigation and that deposited pursuant to the interim order passed by the Tribunal was a revenue deposit and not an excise duty deposit and there was no challenge to this finding of the Tribunal, the appellant cannot now, after the Commissioner (Appeals) has allowed the appeal by order dated 28-5-2019, raise this issue by filing the present appeal to assail the order dated 28-5-2019.

21. It also needs to be noted that the revenue had accepted the order dated 31-1-2017 passed by the Tribunal, as is clear from the letter dated 9-10-2017, the relevant paragraph of which is reproduced below :

11. The review Branch of CGST Commissioner of Noida Vide their letter C. No. V(15) JUD/CESTAT/FO/PAPL/N-1/238/2017/1856, dated 9-10-2017 informed that the Competent Authority has accepted CESTAT Final Order No. A/70145/2017-EX (DB), dated 31-1-2017 on 6 10-2017.

22. This apart, the Assistant Commissioner, by the order dated 13-10-2018, had also ordered for refund of the amount and this order was also not assailed by the Department.

24. Excise Appeal No. 70628 of 2019 has been filed by the appellant for a relief that interest at the rate of 12% should be granted to the appellant from the date of deposit of the amount instead of 6%, as ordered by the Commissioner (Appeals). In this connection, Learned Counsel for the appellant has placed reliance upon the following decisions: (i) Sandvik Asia Ltd. v. Commissioner of Income Tax-I, Pune [ 2006 (196) E.L.T. 257 (S.C.)

(ii) Pace Marketing Specialities v. Commissioner of Central Excise [ 2007 (8) S.T.R. 193 (S.C.)]. 2012 (27) S.T.R. 420 (All.)

(iii) Ebiz.Com Pvt. Ltd. v. Commissioner of Central Excise, Customs & S.T. [ 2011 (274) E.L.T. 13 (All.)]. 2017 (49) S.T.R. 389 (All.)]

(iv) Riba Textiles Ltd. Village Chidana, Tehsil Gohana Distt. Sonepat, Haryana v. Commissioner of Central Excise and Service Tax, Panchkula [2020-TIOL-932-CESTAT-CHD].

39. In this connection reference can also made to the decisions of the Allahabad High Court in Pace Marketing Specialities and Ebiz.Com Private Limited, wherein after making reference to 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.

42. Thus, for the reason stated above, Excise Appeal No. 70628 of 2019 is allowed and the order dated 28-5-2019, passed by the Commissioner (Appeals) is modified to the extent that interest shall be granted to the appellant @ 12% instead of @ 6% from the date of deposit till the date of payment.

• Churchit International v. Commissioner of Customs (Export), New Delhi [Final Order No. 58537 of 2024 dated 06.09.2024 in Customs Appeal No. 51301 of 2023 – CESTAT, New Delhi]

“The issue pertains to refund of amount of interest paid on the amount collected during course of investigation which was paid much before issuance of Show cause Notice. The principle amount was ultimately refunded since no demand was ever confirmed against the appellant. However, the issue of refund of amount of interest was left open to be decided by refund sanctioning authority.

…

5. Having heard both the parties and after perusing the record it is worth noting that amount of Rs.50,00,000/- was deposited much before issuance of show cause notice and adjudication order did not confirm any demand against the appellant and thus the said amount was never appropriated against any demand. There was no demand against the appellant and accordingly such collection of amount was without authority of law. This position of law is now settled by various courts. I rely upon the case of Parle Agro Pvt. Ltd. reported as 2018 (360) ELT 1005 (T-All.) and Omjai Bhavani Silk Mils (P) Ltd. reported as 2009 (243) ELT 560 (T-Bang.). Rely upon the decision of this Tribunal in the case of M/s. Toyota Kirloskar Auto Parts Pvt. Ltd. reported as 2009 (240) ELT 124 (Tri.-Bang.) in which is held that:

“The amount is not due and it had also been collected much before the adjudication order, the amount can only be treated as deposit. The officer of DRI had clearly no jurisdiction to demand and collect any amounts from the assessee, in view of the fact that they are not vested with powers of an Assessing Officer. Furthermore, if we were to accept this argument of the learned counsel, then it would tantamount to allowing the Revenue to take advantage of its own wrong. This apart, the Revenue has enjoyed the benefits of the money collected from the assessee on account of purported liability to pay duty, which was ultimately proved to have been wrongly foisted. Therefore, in our opinion, it only be right that the Revenue be called upon to pay interest to the assessee because, by its nature, any such collection of money be Revenue can only be termed as exaction under ostensible authority of law.”

6. From the decision it is clear that any amount received during investigation is Revenue Deposit hence cannot be retained for want of any authority of law to retain such amount. Unless there is valid demand against the depositor, it must be refunded with interest from the date it was wrongly collected. Reliance is also placed on Hon’ble Supreme Court’s judgment in the case of kuil Fireworks Industries Vs. Collector of Central Excise reported as 1997 (95) E.L.T. 3 (SC), wherein Hon’ble Supreme Court ordered predeposit made by assessee to be returned with 12% interest since the demand raised by the Collector was quashed by the Supreme Court. But Commissioner (Appeals) has allowed, the appeal with the directions to the Refund Sanctioning Authority to allow payment of interest from the date of deposit till the final payment was made with applicable rate of interest (as applicable for delayed refund) during relevant period. Thus no rate of interest is mentioned in concluding Para where in the entire order eligibility for interest @12% has been discussed.

…

12. From the above discussion about various decisions, it is clear that Section 11B and 11BB of Central Excise Act will not be applicable to the amount in question. The assessee is entitled for interest on the amount deposited during investigation. Otherwise also, as per the Article 300A of Constitution of India also, no person shall be deprived of his property, save by authority of law. Once the demand proposed under five show cause notices is set aside, it becomes clear that the money deposited continues to be the appellant’s property. He cannot be deprived of the same and is entitled for benefits arising out of said property. Hence interest accrued on the amount in question during the period it was in fixed deposit is the property of the owner of the amount i.e. the appellant herein. It was otherwise, involuntary deposited.

13. Following the said law of land, I hold that the appellants are entitled to claim the interest on the amount as has been refunded in their favour that too to be paid from the date of payment of initial amount till the date of its refund as has already been held by Commissioner (Appeals).

…

19. Consequent to the entire above discussion, the findings of the order under challenge are upheld with respect to holding appellant entitled for getting refund of the amount along with interest. However, it is held that the appellant is entitled to have interest on the amount of refund sanctioned at the rate of 12% per annum to be calculated from the date of the deposit of the amount till the date refund thereof. Resultantly, the present appeal is hereby allowed.”

• Berger Paints India Ltd. v. Commissioner of Customs (Appraising Refund Section), Port, Kolkata [Final Order No. 75927 of 2026 dated 22.07.2026 in Customs Appeal No. 75631 of 2026 – CESTAT, Kolkata]

“5.1. We find that the Appellant has relied upon the decision of the Hon’ble Calcutta High Court in the case of Rajendra Kumar Jain Vs Commissioner of Customs (Port), Kolkata & Others, wherein vide order dated 09.05.2024, the Hon’ble High Court has set aside the order of this Tribunal granting interest @6% and has categorically held that interest @12% is payable on delayed refund of the amount deposited during the course of Investigation. We have gone through the Order passed by the Hon’ble High Court. In that case, the department has paid interest @6% while refunding the amount deposited during the course of investigation. On appeal, the Hon’ble High Court has categorically held that there is no statutory provision available at present fixing the rate of interest for the refund of the amount deposited during investigations. Till such time a statutory provision granting interest is notified in law, interest @12% is payable. For ready reference, the relevant portion of the order passed by the Hon’ble High Court is reproduced below:

9. Learned senior standing counsel for the respondents now states that the Government of India, Ministry of Finance (Department of Revenue), New Delhi has issued a notification No. 70/2014/Customs (N.T.) dated 12.08.2014 in exercise of powers conferred under Section 129EE of the Customs Act, 1962 fixing the rate of interest @ 6% per annum for the purposes of the said Section and, therefore, the same rate of interest is applicable. We do not find any substance in this submission of learned senior standing counsel for the respondents. Reason is that the said notification is dated 12.08.2014. The rate of interest on delayed refund of pre-deposit shall be governed by the law laid down by Hon’ble Supreme Court in ITC Limited (supra) as well as a coordinated Bench of this Court in Madura Coats Private Limited (supra) till a statutory provision in the Act was enacted and a notification was issued thereunder providing for rate of interest on delayed refund of pre-deposit. With effect from the date on which the provision came in the statute, it shall hold the field and the rate of interest shall be governed by it. Since the period in question is prior to the notification providing for rate of interest on delayed refund of pre-deposit, issued under the Act, therefore, the case of the appellant shall be governed by the law laid down by the coordinate Bench of this Court in Madura Coats Private Limited (supra).

5.2. From the decision of the Hon’ble High Court extracted above, we find that the Hon’ble High Court has categorically held that interest @12% is payable in respect of refund of amount deposited during the course of investigation. In this regard, we find that there are different decisions by various High Courts on the issue of refund of the amount deposited during the course of investigation. However, the decision of the Jurisdictional High is binding on the Tribunals falling within it’s jurisdiction, as held by the Larger Bench in the case of Collector of Central Excise Chandigarh vs. Kashmir Conductors – 1997 (96) E.L.T. 257 (Tribunal), wherein it is held as under:

“10. The question as to how the Tribunal should proceed in the face of conflicting decisions of High Courts has been considered in M/s. Atma Steels P. Ltd. and others v. Collector of Central Excise, Chandigarh reported in l984 (17) E.L.T. 331 wherein the Larger Bench consisting of five Members held that, in view of its All India jurisdiction and peculiar features, the Tribunal cannot be held bound to the view of any one of the High Courts, but has the judicial freedom, to consider the conflicting views, reflected by different High Courts, and adopt the one considered more appropriate to the facts of a given case before the Tribunal. The Tribunal also indicated that this should be so, irrespective of the fact whether one particular assessee was within the jurisdiction of a specified High Court or the original adjudicating authority was located there.

10.2 In a recent decision of the Tribunal in the case of Madura Coats v. CCE, Bangalore reported in 1996 (82) E.L.T. 512, it has been held that the decision of a particular High Court should certainly be followed by all authorities within the territorial jurisdiction of that High Court and that the authorities in another State are not bound to follow the views taken by a particular High Court in the absence of a decision by the jurisdictional High Court with regard to constitutionality of a provisions. The Tribunal has held that since the adjudication of vires of a provision of a statute or Notification is outside the jurisdiction of the Tribunal and the jurisdictional High Court i.e., the High Court having jurisdiction over the authority and the assessee, has not struck down the provision or Notification as ultra vires, the Tribunal has to follow the same and the assessee is entitled to take the stand that he is entitled to the benefit of the particular provision or Notification since the jurisdictional High Court has not struck it down, even though some other High Court may have done so. In case the conflict of decisions among High Courts does not relate to vires of any provision or Notification, it has been held that the Tribunal has to proceed in accordance with the decision in Atma Steels P. Ltd. in the light of the decision of Supreme Court in the East India Commercial Company case i.e. where the jurisdictional High Court has taken a particular view on interpretation or proposition of law, that view has to be followed in cases within such jurisdiction. If the jurisdictional High Court has not expressed any view in regard to the subject matter and there is conflict of views among other High Courts, then the Tribunal will be free to formulate its own view in the light of Atma Steels P. Ltd. case; however, there is a decision of only one High Court in regard to disputed interpretation or proposition of law, the Tribunal is bound to follow that order since it is not at liberty to disregard the solitary High Court decision.” Thus, respectfully following the decision of the Larger Bench, we hold that the decision of the Hon’ble Calcutta High Court dated 09.05.2024, in the case of the case of Rajendra Kumar Jain Vs Commissioner of Customs (Port), Kolkata & Others, is squarely applicable to the facts and circumstances of this case. Accordingly, we hold that the Appellant is eligible for interest @12% in this case. Thus, we hold that the impugned order sanctioning refund @6% is legally not sustainable and hence we set aside the same.

6. In view of the above findings, we hold that the appellant is entitled to the interest @12%, for the refund of the amount deposited during the course of investigation. The appeal filed by the Appellant is allowed on the above terms.”

[Emphasis supplied]

14.1. We find that to the facts of the present appeal, the cited case laws are squarely applicable. 15. As a result, we set aside the impugned order and allow the appeal, holding as under: –

(a) The amounts paid (deposited) by the appellant in the course of investigation lose the colour of Excise Duty once the Tribunal holds that no Excise Duty demand is sustainable, particularly when such order is not further challenged by the Revenue.

(b) The Revenue has no legal claim for the amounts deposited by the appellant in the course of investigation and the same is required to be refunded to the appellant along with interest. Revenue cannot take the umbrage of non-availability any statutory provision to deny the interest.

(c) The appellant would be entitled for interest @ 12% per annum from the date of deposit till the date on which the refund has been granted.

(d) Since the amount paid by the appellant has been held up for about 30 years, the interest should be calculated and paid within 8 weeks from the date of receipt of this order.

(Order pronounced in the open court on 15.09.2026)