Case Law Details
Cubex Tubings Limited Vs The Commissioner of Central Tax (CESTAT Hyderabad)
In the present case, section 35F of the Excise Act, as it stood prior to 06.08.2014, provides for payment of interest only if the pre-deposit amount is not refunded within a period three months from the date of communication of the order to adjudicating authority.
Facts-
The appellant had sought refund of an amount of Rs. 32 lakhs and Rs. 84 lakhs deposited by the appellant in the two appeals filed before the Tribunal towards the pre-deposit amount required to be deposited under section 35F of the Excise Act as the appeals were ultimately allowed by the Tribunal by order dated 28.02.2019. The Deputy Commissioner directed for refund of the pre-deposit amount, but rejected the claim for interest for the reason that section 35F of the Excise Act, as it stood prior to 06.08.2014, would be applicable and not the amended provisions. The Deputy Commissioner found, as a fact in both the matters, that the refund had been sanctioned within three months from the date it was claimed and, therefore, interest would not be payable. The appeals filed by the appellant before the Commissioner (Appeals) were also rejected for this reason.
Conclusion-
In the present case, section 35F of the Excise Act, as it stood prior to 06.08.2014, provides for payment of interest only if the pre-deposit amount is not refunded within a period three months from the date of communication of the order to adjudicating authority. This is what has been observed by the Commissioner (Appeals).
There is, therefore, no error in the order dated 16.08.2019 passed by the Commissioner (Appeals). Excise Appeal No. 30543 of 2019 and Excise Appeal No. 30544 of 2019 are, accordingly, dismissed.
FULL TEXT OF THE ORDER OF ITAT HYDERABAD
These two appeals have been filed by Cubex Tubings Limited1 seeking quashing of the order dated 16.08.2019 passed by the Commissioner (Appeals)-II, Hyderabad 2 . This order rejects the two appeals filed by the appellant for setting aside the two orders dated 13.02.2019 and 25.03.2019 passed by the Deputy Commissioner of Central Tax3.
2. The dispute in these two appeals relates to rejection of the claim of interest made by the appellant on the amount of refund of pre-deposit under section 35F of the Central Excise Act, 19444 from the date of the deposit till the date of sanction of the amount. This interest was claimed under section 35FF of the Excise Act.
3. The appellant had sought refund of an amount of Rs. 32 lakhs and Rs. 84 lakhs deposited by the appellant in the two appeals filed before the Tribunal towards the pre-deposit amount required to be deposited under section 35F of the Excise Act as the appeals were ultimately allowed by the Tribunal by order dated 28.02.2019. The Deputy Commissioner directed for refund of the pre-deposit amount, but rejected the claim for interest for the reason that section 35F of the Excise Act, as it stood prior to 06.08.2014, would be applicable and not the amended provisions. The Deputy Commissioner found, as a fact in both the matters, that the refund had been sanctioned within three months from the date it was claimed and, therefore, interest would not be payable. The appeals filed by the appellant before the Commissioner (Appeals) were also rejected for this reason.
4. To appreciate the submissions advanced by Shri PVB Chary, learned counsel for the appellant and Shri AVLN Chary, learned authorized representative appearing for the Department, it would be necessary to reproduce the provisions of section 35FF of the Excise Act, as it stood prior to 6.08.2014 and after 06.8.2014.
Prior to 6.8.2014
“35 FF: Where an amount deposited by the appellant in pursuance of an order passed by the Commissioner (Appeals) or the Appellate Tribunal (hereinafter referred to as the appellate authority), under the first proviso to section 35F, is required to be refunded consequent upon the order of the appellate authority and such amount is not refunded within three months from the date of communication of such order to the adjudicating authority, unless the operation of the order of the appellate authority is stayed by a superior court or tribunal, there shall be paid to the appellant interest at the rate specified in section 11BB after the expiry of three months from the date of the order of the appellate authority, till the date of refund of such amount.”
Post 6.8.2014
“35 FF: Where an amount deposited by the appellant under section 35F is required to be refunded consequent upon the order of the appellate authority, there shall be paid to the appellant interest at such rate, not below five percent and not exceeding thirty-six percent per annum as is for the time being fixed by the Central Government, by notification in the Official Gazette, on such amount from the date of payment of the amount till the date of refund of such amount.
Provided that the amount deposited under section 35F, prior to the commencement of the Finance (No.2) Act, 2014 shall continue to be governed by the provisions of Section 35 FF as it stood before the commencement of the said Act.”
5. Learned counsel for the appellant submitted that since the Tribunal allowed the two appeals filed by the appellant on 28.02.2019 much after 06.08.2014, on which date section 35FF was amended, the appellant would be entitled to interest in terms of the amended provisions of section 35FF of the Excise Act. Learned counsel also submitted that the appellant is entitled to be compensated due to the financial loss and in support of this submission learned counsel placed reliance upon the decision of the Supreme Court in Sandvik Asia Ltd. Commissioner of Income Tax-I, Pune5 as also the decision of a learned Member of the Tribunal in J.K. Cement Works vs. Commissioner, Central Excise, Central Goods and Service Tax6. Learned counsel also placed reliance upon the judgment of the Delhi High Court in MRF Ltd. vs. Commissioner of Trade and Taxes7 and the decision of the Tribunal in Riba Textiles Ltd. vs. Commissioner of CE & ST, Panchkula8.
6. Learned authorized representative appearing for the Department, however, supported the order passed by the Commissioner (Appeals) and contended that in view of the proviso to the amended section 35FF of the Excise Act, the unamended provisions of the section 35FF of the Excise Act would be applicable and so the appellant would not be entitled to interest as the amount was refunded within three months from the date of communication of such order. In support of this submission learned authorized representative placed reliance upon the following decisions:
(i) Hindustan Agro Insecticides Commissioner of Central Tax, Guntur9;
(ii) M/s. Saluja Motors Pvt. Ltd. Commissioner of CE & ST-Chandigarh-I10; and
(iii) Commissioner of Customs & GST, Mumbai West Juhu Beach Resort Ltd.11
7. The submissions advanced by the learned counsel for the appellant and the learned authorized representative appearing for the Department have been considered.
8. It is not in dispute that the amount towards pre-deposit under secton 35F of the Excise Act was deposited by the appellant on 30.08.2012, which date is prior to 06.08.2014 on which date section 35FF of the Excise Act was amended. The proviso to section 35FF of the Excise Act, as it stood after amendment on 06.08.2014, clearly stipulates that the amount deposited under section 35F of the Excise Act prior to 06.08.2014 shall continue to be governed by the provisions of section 35FF of the Excise Act as it stood before 06.08.2014. Thus, the appellant would not be entitled to claim interest on the pre-deposit amount as the provisions of section 35FF of the Excise Act, as it stood prior to its amendment on 06.08.2014, would be applicable. This is for the reason that section 35FF of the Excise Act, as it existed prior to 06.08.2014, provided that where the amount deposited towards pre-deposit under section 35F of the Excise Act is required to be refunded consequent upon the order of the appellate authority and such amount is not refunded within three months from the date of communication of such order to the adjudicating authority, there shall be paid to the appellant interest at the rate specified in section 11BB after the expiry of three months from the date of the order of the appellate authority, till the of refund of such amount. In other words, if the amount is refunded within three months from the date of communication of the order, interest would not be paid.
9. In the present case, it is not in dispute that the amount towards pre-deposit was deposited on 30.08.2012 and that the amount was sanctioned within three months from the date of communication of the order of the Tribunal to the adjudicating authority. The appellant would, therefore, not be entitled to claim interest. This is what was observed by the Deputy Commissioner as also the Commissioner (Appeals) while rejecting the claim of the appellant for payment of interest.
10. This view finds support from the judgment of the Allahabad High Court in IFP Products (P) Ltd. Union of India and Anr12. The High Court held that in view of the proviso to the amended provisions of section 35FF of the Excise Act, the unamended provisions of section 35FF of the Excise Act would be applicable under which no interest can be paid if the amount is deposited within three months from the date of communication of the order of the Appellate Tribunal and the relevant observations made in the judgment are reproduced below:
“Section 35FF of the Act provides for the payment of interest on delayed refund of amount deposited under Section 35F of the Act.
The aforesaid provision as it stood at the relevant time i.e. on 03.08.2016 or 28.11.2016, when the appeal of the petitioner was allowed and the amount was refunded provided that where any amount deposited in pursuance of the order of the Commissioner (Appeals) or the Appellate Tribunal is required to be refunded consequent upon the order of the Appellate Authority, such amount shall be refunded and if it is not so refunded within a period of three months from the date of communication of the order of the Appellate Authority, interest shall be payable at the rate specified under Section 11BB of the Act after the expiry of the aforesaid three months.
A reading of the aforesaid provision reflects that any amount deposited pursuant to the order passed by any Authority is liable to be refunded within a period of three months from the date, the order is set aside by the Appellate Authority and in case, it is not so refunded within three months of the communication of the appellate order, interest at the specified rate shall be payable on it for the delayed period after three months.
The aforesaid provision of Section 35FF of the Act was amended by the Finance Act No. 25 of 2014 with effect from 06.08.2014 and it was provided that where any amount deposited by the party under Section 35F of the Act is required to be refunded consequent upon the order of the Appellate Authority, it will carry an interest at the specified rate till the date of refund.
It permits payment of interest at the specified rate for the entire period, the amount remains deposited with the authority. However, the aforesaid provision has been subjected to a proviso, which lays down that if any amount has been deposited prior to the enforcement of the Finance Act No. 25 of 2014 i.e. before 06.08.2014, it shall continue to be governed by the unamended provision of Section 35FF of the Act, which means that in cases of deposit made prior to 06.08.2014, interest would be payable only if the amount is not refunded within a period of three months from the date of communication of the appellate order.
Apart from the above provision, there is no other provision, which permits payment of interest on the amount of excise duty deposited in pursuance to the order of the Commissioner (Appeals) or the Tribunal by any party. A composite reading of unamended Section 35FF and amended Section 35FF of the Act reveals that in respect of an amount deposited prior to the commencement of the Finance Act No. 25 of 2014, interest on the refunded amount is payable only if it is not refunded within three months of the communication of the order of the appellate authority entitling the refund and that too after the expiry of three months of the communication of the order.
In the present case, the amount was deposited on 24.04.2014 and 28.04.2014, the appeal entitling the refund was allowed on 03.08.2016 and the refund was actually made on 28.11.2016.
All the aforesaid dates are earlier to 06.08.2016, the date of enforcement of Finance Act No. 25 of 2014. Thus, in view of the proviso to the amended Section 35FF of the Act, the payment of interest to the petitioner would be governed by the unamended Section 35FF of the Act.
Accordingly, if at all the petitioner would be entitled to interest on the amount refunded, it will be for the period the amount had remained with the respondents after three months from the date of communication of the appellate order.”
11. This judgment of the Allahabad High Court was followed by the Division Bench of the Tribunal in M/s. Fujikawa Power CCE & ST, Chandigarh-I13
12. A learned Member of the Tribunal in Hindustan Agro Insecticides, also observed as follows:
“5. I have considered the arguments made in the appeal memorandum and the relevant legal provisions. The proviso to amend Section 35FF makes it clear that in respect of any amounts pre-deposited prior to 6-8-2014 will continue to be covered by the provisions of the unamended Section 35FF. The unamended provisions provided for payment of interest only if the pre-deposit was not refunded within three months from the date of communication of the order of the appellate authority. Therefore, no interest is payable to the appellant in this case. The impugned order is correct and calls for no interference. Accordingly, the appeal is rejected and the impugned order is upheld.”
13. Learned counsel for the appellant, however, placed reliance upon a decision of a learned Member of the Tribunal in J.K. Cement Works. In this case the pre-deposit was made on 31.03.2006 but the appellant succeeded before the High Court on 25.01.2018. While claiming refund of the pre-deposit amount, the contention that was advanced was that the appellant would also be entitled to interest under the amended provisions of section 35FF of the Excise Act. The learned Member allowed payment of interest, even though the amount was refunded within three months from the date of communication of the order following the decision of the Supreme Court in Sandvik Asia Ltd. This judgment of the Supreme Court does not deal with the issue in hand. The main issue that arose before the Supreme Court was whether an assessee is entitled to be compensated by the Income Tax department for the delay in paying to the assessee the amount admittedly due. The delay in the matters before the Supreme Court were for various periods ranging from 12 to 17 years and the Supreme Court noticed that there was no justifiable reason for withholding the amount for such long period time. Interest on the amount refunded was granted to the appellant but the appellant also claimed interest on the Advance Tax that was paid. It is in this context that the Supreme Court held that interest was also required to be paid on the Advance Tax since Advance Tax has also to be treated as paid pursuant to an order for assessment. The decision the learned Member of the Tribunal in J.K. Cement Works, therefore, does not lay down the correct position of law and would not come to the aid of the appellant.
14. The decision of the Tribunal in Riba Textiles also does not help the appellant as it also relies upon the decision of the Supreme Court in Sandvik Asia Ltd.
15. The judgment of the Delhi High Court in MRF Limited will also not help the appellant. This judgment holds that the pre-deposit amount which is required to be deposited when an appeal is preferred does not bear the character of a tax and, therefore, the filing of a form which is purely for the purpose of administrative convenience cannot in any manner fixe the period of limitation.
16. In the present case, section 35F of the Excised Act, as it stood prior to 06.08.2014, provides for payment of interest only if the pre-deposit amount is not refunded within a period three months from the date of communication of the order to adjudicating authority. This is what has been observed by the Commissioner (Appeals).
17. There is, therefore, no error in the order dated 16.08.2019 passed by the Commissioner (Appeals). Excise Appeal No. 30543 of 2019 and Excise Appeal No. 30544 of 2019 are, accordingly, dismissed.
(Order Pronounced on 20.05.2022)
Notes:-
1. the appellant
2. the Commissioner (Appeals)
3. the Deputy Commissioner
4. the Excise Act
5. 2007 (8) S.T.R. 193 (SC)
6. Excise Appeal No. 50479 of 2019 decided on 02.03.2021
7. 2018 (19) G.S.T.L. 478 (Del.)
8. Excise Appeal No. 60446 of 2018 decided on 07.01.2020
9. 2019 (367) E.L.T. 669 (Tri. – Hyd.)
10. Service TAX Appeal No. 60175 of 2020 decided on 03.12.2020
11. 2020 (371) E.L.T. 622 (Tri. – Mumbai)
12. Writ Tax No. 653 of 2017 decided on 20.09.2017
13. Excise Appeal No. 60966 of 2019 decided on 26.11.2019
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