CESTAT Ahmedabad held that appellant is duly entitled for interest on refund of pre-deposit amount @6% from the date of deposit of pre-deposit till the date of refund in a case where the Tribunal has finally passed the final order setting aside the demand.
Facts- The issue involved in the present case is whether the appellant is entitled for interest from the date of deposit of pre-deposit or after the three months from the date of filing of refund application.
Conclusion- I find that limited issue to be decided is whether the appellant is entitled for interest from the date of deposit of pre-deposit in a case where the Tribunal has finally passed the final order setting aside the demand. I find that on this issue Hon’ble Supreme Court/ High Courts and this Tribunal has taken a view that in case of pre-deposit, interest should be given from the date of deposit.
Held that it is settled that the appellant are entitled for the interest on refund of pre-deposit amount @6% from the date of deposit till the date of refund.
FULL TEXT OF THE CESTAT AHMEDABAD ORDER
The issue involved in the present case is whether the appellant is entitled for interest from the date of deposit of pre-deposit or after the three months from the date of filing of refund application.
2. Shri PP Jadeja, learned Consultant appearing on behalf of the appellant submits that the amount of refund which was granted was deposited as pre-deposit. In case of pre-deposit, the interest is payable right from the date of pre-deposit which is settled in various judgments relied upon as under:-
(a) CCE, Panchkula vs. Riba Textiles Limited – 2022 (61) GSTL 136 (P&H)
(b) Pr. Commissioner of CGST, New Delhi vs. Emmar MGF Construction Pvt. Limited – 2021 (55) GSTL 311 (Tri. Del.)
(c) Hawkins Cookers Limited vs. CCE, Chandigarh – 2017 (6) GSTL 308 (Tri. Chan.)
(d) CCE, Kutch (Gandhidham_ vs. Deep Construction Co. – 2019 (365) ELT 532 (Tri. Ahmd.)
(e) Team HR Services Pvt. Limited vs. UOI – 2020 (38) GSTL 457 (Del.)
(f) Ashima Limited vs. CCE & ST., Ahmedabad – 2019 (369) ELT 967 (Tri. Ahmd.)
(g) CCE, Hyderabad vs. ITC Limited – 2005 (179) ELT 15 (SC)
3. Shri Vijay G Iyengar, learned Assistant Commissioner (AR) appearing on behalf of the Revenue reiterates the findings of the impugned order.
4. I have carefully considered the submissions made by both sides and perused the record. I find that limited issue to be decided is whether the appellant is entitled for interest from the date of deposit of pre-deposit in a case where the Tribunal has finally passed the final order setting aside the demand. I find that on this issue Hon’ble Supreme Court/ High Courts and this Tribunal has taken a view that in case of pre-deposit, interest should be given from the date of deposit. Some of the judgments are as under:-
(a) In the case of Riba Textiles Limited (supra) the Hon’ble Punjab & Haryana High Court observed as under :
“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.
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.
By allowing this appeal, the Income-tax 49. 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 273-1998 on which date a sum of Rs. 40,84,906/- was refunded.
The assessment years in question in the 50. 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 of to 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. 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.
11. Consequently, finding no merit in the present case, the instant appeal is hereby dismissed.”
(b) In the case of Emmar MGF Construction Pvt. Limited (supra), the Principal Bench of this Tribunal held as under:
“2. The Revenue is in appeal against the impugned order-in-appeal whereby the interest @ 6% have been allowed on the amount of deposit, pending litigation, from the date of deposit till the date of actual refund.
3. Brief facts of the case are that show cause notice dated 26-12-2008 was issued alleging non-payment of service tax on registration fees/transfer charges amounting to Rs. 1,18,19,212/- including cess for the period 1-4-2006 to 30-9-2008, invoking the extended period of limitation. The appellant was also issued recurring show cause notices for the subsequent period as follows :-
|Demand-cum-show cause notice No.||Date||Amount (Service Tax
including cess) in Rs.
|1.||SCN No. DL-I/ST/R-IV/RIP/ Emaar/MGF/08||5-2-2010||4,69,400/-||1-10-2008 to 31-3-2009|
|2.||SCN No. DL-I/ST/R-IV/RIP/ Emaar/MGF/08||27-9-2010||11,78,499/-||1-4-2009 to 31-3-2010|
|3.||SCN No. DL-I/ST/R-IV/RIP/Emaar/MGF/08||19-10-2011||36,83,365/-||1-4-2010 to 31-3-2011|
|4.||SCN No. DL-I/ST/R-IV/RIP/ Emaar/MGF/08||18-9-2012||50,19,861/-||1-4-2011 to 31-3-2012|
|5.||SCN No. DL-I/ST/R-IV/RIP/ Emaar/MGF/08||8-5-2014||25,62,001/-||1-4-2012 to 30-6-2012|
4. The aforementioned show cause notices were adjudicated vide order-in-original dated 27-8-2019, whereas the respondent-assessee was successful (demand dropped). The respondent filed refund claim on 9-10-2019 praying for refund of Rs. 2,47,32,326/- being the amount deposited by them with respect to the aforementioned show cause notices, which was deposited by the respondent vide debit in the Cenvat register for the month of October, 2015, was also reflected in the ST-3 return for the period October, 2015 to March, 2016.
5. Vide the order-in-original dated 17-1-2020, the Assistant Commissioner allowed the refund of the principal amount. However, please to reject the interest claim, observed that the Department has to pay interest, if any, from the date on which Department was not entitled to hold the amount. In this case Department has issued deficiency memo dated 24-12-2019 and requisite documents submitted on 9-1-2020 and the refund application was disposed of on 27-1-2020. There is no delay in sanctioning of the refund claim on the part of the revenue, hence interest is not payable. Interest was not applicable in the present case, as this is neither the case of any pre-deposit deposited for filing appeal, nor the refund claim is delayed. Being aggrieved, the appellant preferred the appeal before the Commissioner (Appeals) who vide the impugned order has been pleased to grant interest @ 6% from the date of deposit till the date of refund.
6. Being aggrieved, Revenue filed the present appeal on the ground that under the erstwhile Section 35FF (as substituted by way of amendment w.e.f. 6-8-2014), interest is payable on filing of refund claim, if not granted within three months from the date of receipt of the appellate order. As the show cause notice was issued to the assessee prior to 6-8-2014, the erstwhile Section 35FF will be applicable. It is further urged that the amount deposited in the year 2015 is not by way of pre-deposit, as defined in Section 35F of the Act. Reliance is placed on the ruling of Hon’ble Gujarat High Court in the case of Ajni Interiors v. UoI, wherein it has been held that if any payment is made as a pre-condition for exercising the statutory right, it can be termed as pre-deposit. However, it cannot be equated with voluntary deposit of Excise duty paid even during the course of investigation and prior to show cause notice or adjudication to assert that it is pre-deposit. Further, reliance is placed on the finding of the Adjudicating Authority.
7. Opposing the appeal, Learned Counsel Shri Puneet Agrawal urges that the issue is not longer res integra as the Division Bench of this Tribunal in Parle Agro (P) Ltd. Commissioner, CGST – 2021-TIOL-306-CESTAT-ALL, following the ruling of the Apex Court in Sandvik Asia Ltd. – 2006 (196) E.L.T. 257 (S.C.) = 2007 (8) S.T.R. 193 (S.C.) have held that such amount deposited during investigation and/or pending litigation is ipso facto pre-deposit and interest is payable on such amount to the assessee being successful in appeal, from the date of deposit till the date of refund.
8. Considering the rival contentions, this appeal by the Revenue is dismissed. Further, it is directed that the Adjudicating Authority shall disburse the amount of interest @ 12% per annum forthwith, within a period of 45 days from the date of receipt of the copy of this order, as held by Division Bench of this Tribunal in Parle Agro (P) Ltd., (supra).
9. Thus, the appeal by Revenue is dismissed with directions as above.”
(c) In the case of Hawkins Cookers Limited (supra), Chandigarh Bench of this Tribunal passed the following decision :
6. The short issue in hand is before me that :
Issue No. 1
Whether the assessee is required to file the application for refund claim in consequent to the order of the Hon’ble Apex Court dated 11-12-1996 or not?
Issue No. 2
Whether the amount paid by the assessee under Section 35N of the Act is a pre-deposit or not?
Issue No. 3
Whether the assessee is entitled to claim interest after three months from the date of the order of the Hon’ble Apex Court dated 11-12-1996 till its realization or not?
7. I have gone through the issue no. 1 whether the assessee is required to file an application for refund claim to the order of Hon’ble Apex Court on 11-12-1996 or not?
8. I have gone through the C.B.E. & C. Circular No. 802/35/2004-CX., dated 8-12-2004, the relevant contents of the circular reproduced as under :
4. Accordingly, the contents of the circular no. 275/37/2000-CX. 8A, dated 2-1-2002 [2002 (139) E.L.T. T38] as to the modalities for return of the pre-deposits are reiterated. It is again reiterated that in terms of Hon’ble Supreme Court’s order such pre-deposit must be returned within 3 months from the date of the order passed by the Appellate Tribunal/Court or other Final Authority unless there is a stay on the order of the Final Authority/CESTAT/Court, by a superior Court.
9. On going through the C.B.E.&C. Circular No. 802/35/2004-CX., dated 8-12-2004 which has been certified that the amount of pre-deposit is required to be refunded within three months of the order passed by the Appellate Court/Court or other Final Authority, by a superior Court and there is no requirement to file refund application. Admittedly there is no stay of the order dated 11-12-1996 passed by the Hon’ble Apex Court. In terms of the C.B.E. & C. Circular, dated 8-12-2004, the assessee is not required to file any application for refund. In these terms the issue no. 1 is answered in favour of the assessee.
10. I have gone through the Issue No. 2, Whether the amount paid by the assessee under Section 35N of the Act is a pre-deposit under Section 35F of the Central Excise Act or not?
The said issue came up before the Hon’ble High Court of Gujarat in the case of Ghaziabad Ship Breakers Ltd. (surpa) wherein the Hon’ble High Court observed as under :
8. Another aspect of the matter is that under Section 129E of the Act in case of any appeal under the chapter, the person desirous of appealing against an order relating to any duty and interest demanded in respect of goods which are not under the control of the customs authorities or any penalty levied under the Act, is required to deposit with the proper officer on duty and interest demanded or penalty levied. Section 129E of the Act falls under Chapter XV under the heading Appeals. Chapter XV of the Act is comprised of various provisions from Section 128 to Section 131C of the Act. Section 130 of the Act which provides for appeal to High Court and Section 130E of the Act which provides for appeal in Supreme Court also fall under Chapter XV. Thus, an appeal before the Supreme Court would also be an appeal under the said Chapter as envisaged under Section 129E of the Act. Thus, any amount deposited during the pendency of an appeal before the High Court or the Supreme Court would also be by way of deposit under Section 129E of the Act and has to be treated accordingly.
11. On going through the order of the Hon’ble High Court of Gujarat, I find that the Hon’ble High Court has held that any amount of pre-deposit during the pendency of the appeal is a amount of pre-deposit and the same is to be treated accordingly, therefore, I hold that the amount of pre-deposit paid by the assessee under Section 35N is equivalent to the amount paid under Section 35F of the Act and the same is to be treated as pre-deposit accordingly. Moreover, in the adjudication order, the refund claim of the assessee was sanctioned treating the said amount as pre-deposit of Section 35F of the Act, therefore, the said issue cannot be raised by the Revenue at this stage and this issue has also answered in favour of the assessee.
12. I have gone through the Issue No. 3 whether the assessee is entitled to claim interest after three months from the date of the order of the Hon’ble Apex Court dated 11-12-1996 till its realization or not in the facts of the circumstances of the case?
13. The contention of the Revenue is that the assessee is required to file the application for refund which has been negated by the C.B.E. & C. Circular, dated 8-122004 wherein it has been stated that the refund claim is to be sanctioned within three months from the date of order of Appellate Court. In this case, it has been held that there is no requirement to file application for refund but the ld. AR heavily relied on the decision of Ranbaxy Laboratories Ltd. (supra). The facts of the said case are not relevant to the facts of the case in hand. In fact, in the said case, the assessee file rebate claim of duty paid on the export of the goods and the Hon’ble Apex Court held that the interest is payable to refund after three months of the date of the application. In the said case, it was not the issue before the Hon’ble Apex Court whether in pursuant to the order passed by the Appellate Court, the assessee required to file application for refund claim or not, therefore, the facts of the said case are not applicable to the facts of this case and the assessee is not required to file any application for refund claim. Admittedly, the C.B.E. & C. Circular clarifies that the refund claim is to be sanctioned within 3 months from the date of order of the Appellate Court, therefore, any delay in refund the assessee is entitled for interest after 3 months of the order. The same view has been taken by the Hon’ble High Court of Calcutta in the case of Madura Coats Ltd. (supra) wherein the Hon’ble High Court observed as under :
19. The decision of the Supreme Court in the case of the Commissioner of Central Excise v. ITC Limited (supra) as regards refund of amount deposited under Section 35F was governing the field as the Supreme Court has upheld the direction for payment of interest and quantified it to be @ 12% per annum. The issue before the Supreme Court was whether the pre-deposit made as precondition for the hearing of appeal under the Central Excise Act, 1944 was, on the assessee being ultimately successful, refundable to the assessee with interest as there was no provision in the Central Excise Act for payment of interest on such refund. It is in the course of hearing before the Supreme Court that the Learned Solicitor General after taking instructions made a statement that the Central Board of Excise and Customs proposes to issue a circular in connection with the payment of interest on all such pre-deposits. At the time a draft copy of the proposed circular was handed over to the Supreme Court there was no rate of interest specified in the proposal and, therefore, the Supreme Court awarded interest @ 12% per annum. Therefore, when this Court directed the respondent to pay interest to the appellant in terms of the Circular Bearing Circular No. 802/35/2004-CX., dated 8-12-2004 on the pre-deposit of the delayed refund within two months from today it has to be constructed that this court meant the rate of interest which was awarded by the Supreme Court in the case of Commissioner of Central Excise v. ITC Limited which was the rate quantified by the Supreme Court in the absence of any statutory provisions in the said Act.
20. Therefore, in view of the fact that the period for which the petitioner is entitled to interest on the pre-deposit of the delayed refund was the same as in the case of Commissioner of Central Excise v. ITC Ltd. (supra) parity demands that the petitioner is also entitled for interest @ 12% per annum.
21. In so far as the contention of the Revenue that the Central Government is the only authority to fix the rate of interest and that Section 35FF was brought in by providing rate of interest on payment of pre-deposit delayed refund and quantified the rate of interest to be the same as in Section 11BB would not apply to the petitioner’s case as Section 35FF has been introduced in the Act by way of an amendment inserted with effect from May 10, 2008 by Section 85 of the Finance Act, 2008 (18 of 2008). Therefore, we clarify that the petitioner is entitled to interest @ 12% per annum on the amount of refund. We direct that such interest shall be paid by the respondent/Revenue within two months on the date of this order.
14. Further, I find that it has been objected by the Revenue that provisions of [Section] 35F are not applicable to the facts of this case. This issue has been considered by the Hon’ble High Court in the case of Madura Coats Ltd. (supra) and held that although the provisions of [Section] 35FF of the Act are not in the statute book during the relevant time but the same are applicable for interest for delayed refund. The said order of the Hon’ble High Court has been affirmed by the Hon’ble Apex Court.
15. In these terms, I hold that the assessee is entitled for interest after three months from the date of 11-12-1996 till the amount of refund is realised in terms of the decision of the Hon’ble High Court in the case of Madura Coats Ltd. (supra).
16. With these terms the appeal filed by the assessee is allowed with consequential relief and appeal filed by the Revenue is dismissed.”
(d) In the case of Team HR Services Pvt. Limited, identical issue of payment of interest of refund of deposit made during investigation, the Hon’ble Delhi High Court passed the following order:
“17. We are unable to find any justification for the respondents to retain the said amount of Rs. 2,38,00,000/-. We have thus enquired from the Counsel for the respondents, what should be the rate of interest for which the respondents should be held liable.
18. The Counsel for the respondents states that as per the statute, the respondents are liable for interest @ 6% per annum only.
19. Per contra, the Counsel for the petitioner has drawn attention to :
(A) Sandvik Asia Ltd. Commissioner of Income Tax-I, Pune, (2006) 2 SCC 508 = 2006 (196) E.L.T. 257 (S.C.) where interest @ 9% per annum was awarded;
(B) Surinder Singh Union of India, 2006 SCC OnLine Del 1863 (DB) = 2006 (204) E.L.T. 534 (Del.) where interest @ 12% per annum was granted on delayed refund;
(C) Hello Minerals Water (P) Ltd. Union of India, 2004 SCC OnLine All 2187 (DB) = 2004 (174) E.L.T. 422 (All.) where interest @ 10% per annum was granted;
(D) Hindustan Coca-Cola Beverages Pvt. Ltd. Union of India, 2013 SCC OnLine Guj 1487 (DB) = 2015 (324) E.L.T. 299 (Guj.) where interest @ 9% per annum and future interest @ 6% per annum was granted; and,
(E) Ebiz.com Pvt. Ltd. v. Commissioner of Central Excise, Customs & S.T., 2017 (49) S.T.R. 389 (All.) where costs of Rs. 50,000/- were imposed on the Department.
20. In the present case, as aforesaid, the amount of Rs. 2,38,00,000/- was deposited by the petitioner of its own volition, during the audit/investigation, though under protest and the petitioner has not chosen to detail the circumstances in which the petitioner felt compelled to make the deposit. The petitioner for the first time sought refund of the said amount vide letter dated 2nd May, 2018.
21. Considering the said facts, we do not find the petitioner entitled to interest at any higher rate than @ 6% per annum from the date of deposit i.e. 27th October, 2006 till the end of May, 2018 i.e. 31st May, 2018. However, we do not find any justification for the respondents retaining the said amount thereafter and find the respondents liable for interest with effect from 1st June, 2018 onwards and till date @ 7.5% per annum. While so enhancing the rate of interest, we have also taken into consideration the noncompliance by the respondents of the orders of this Court as detailed above, leading to a contempt notice being issued to the respondents and in response whereto Ms. Niharika Gupta, Assistant Commissioner in the Office of Division-Nehru Place, Central GST, Delhi East Commissionerate is present in the Court.
22. The respondents are expected to at least now, on or before 15th July, 2020 refund the amount of Rs. 2,38,00,000/- with interest @ 6% per annum from 1st November, 2006 to 31st May, 2018 and with interest @ 7.5% per annum from 1st June, 2018 till the date of refund on or before 31st July, 2020. However, if the said amount is not refunded by 15th July, 2020, the rate of interest with effect from 1st August, 2020 shall stand enhanced to 12% per annum. A mandamus to the said effect is issued to the respondents GST Department.”
5. In view of the above judgments, it is settled that the appellant are entitled for the interest on refund of pre-deposit amount @6% from the date of deposit till the date of refund. Accordingly, the impugned orders are set-aside, appeals are allowed with consequential relief.
(Pronounced in the open court on 07.02.2023)