Hasmukh Tobacco Products Vs Commissioner of Central Excise & ST (CESTAT Ahmedabad)
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.
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.
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 :-
