2025 (7) TMI 477 - AT - Central Excise

Denial of interest on refund - refund of wrongly availed Cenvat credit on Helium Oxygen Gas and Acetylene Gas that were used for repair and maintenance activity during the period 2003-04 to 2005- 06 - revenue deposit - Section 11B of the Central Excise Act 1944 - HELD THAT - It may be pointed out that the various case laws relied upon by the learned counsel for the appellant were concerned with payment of interest on delayed refunds as ordered by the Courts/Tribunals or concerned with whereby the deposit of duty was made under protest as also have been emphatically relied upon by the learned counsel citing Para 7 of Hon ble Madras High Court s order in the case of M/s. Pricol Ltd. 2015 (3) TMI 735 - MADRAS HIGH COURT . It is evident that the said decision(s) did not dwell upon the dispute as concerns the present matter and therefore it would not be appropriate to rely upon such a decisions(s) rendered in the context of refund sanctioned under Section 11B or where the duty was paid under protest. It is also not agreed that the amount deposited by them pursuant to the issuance of the show cause notices would deem to be paid under protest. The learned Advocate however fairly concedes that they have no evidence to indicate that the said amount was paid under protest but is quick to add that there was no requirement in law to prove of its payment having been made under protest as it was deemed as such. It is also noted from the records that in case of Appeal No. E/55209/2023-SM it had been specifically stated on record that there is no evidence of reversal of Cenvat credit said to have been made under protest rather the same is held to be an Act of appropriation on part of the appellant . It is quite obvious that the appellant s premise that the impugned amounts were deposited at the stage of investigation therefore cannot be sustained. Resultantly the said amount deposited cannot be called as Revenue Deposit. It indeed as explained above is also not an amount of a mandatory pre-deposit in terms of Section 35F of Central Excise Act - The said payment made by the appellant are no more but recouping/apportioning of the amount that in the first place was proposed/held to be inadmissible to them and have been wrongly availed of. The reversal of the exact amount as sought for by the respective show cause notices pursuant to their issuance at best is nothing but reversal of inadmissible amounts and their appropriation towards the duty short paid. Since the amount in question was not deposited for the purposes of filing appeal nor it is proved to have been deposited under protest on the contrary it is observed to be an amount appropriated against the specific proposal made out in the six show cause notices about reversing the said amount it can in no way be considered as a Revenue Deposit. The question of applicability of Section 35FF does not thus at all arise. Admittedly the present cases are also not the cases of the amount collected in excess of duty. Resultantly the only provision applicable in the given circumstances is Section 11BB. The appellant is not entitled to claim interest on the amount of refund - Appeal dismissed.

Summary

The core legal questions considered by the Tribunal in these appeals are:

(i) Whether the appellant is entitled to interest on the amount refunded to them in respect of wrongly availed Cenvat credit, which was reversed post issuance of show cause notices;

(ii) Whether the amount reversed and paid by the appellant after issuance of show cause notices can be construed as a "deposit under protest" or a "pre-deposit" entitling the appellant to interest under relevant provisions;

(iii) The applicability of various provisions of the Central Excise Act, particularly Sections 11B, 11BB, 35F, and 35FF, regarding refund and interest on delayed refunds or deposits;

(iv) The relevance and applicability of judicial precedents concerning unjust enrichment, deposits under protest, and interest on refunds in the context of the facts of the present case.

Issue-wise Detailed Analysis:

1. Entitlement to Interest on Refunded Amount

The appellant sought interest on the refunded amount of wrongly availed Cenvat credit, which was reversed after issuance of show cause notices. The Tribunal examined the relevant statutory provisions governing interest on delayed refunds, especially Section 11BB of the Central Excise Act, 1944. Section 11BB mandates payment of interest on delayed refunds if the refund is not made within three months from the date of receipt of the refund application.

The Tribunal noted that the refund claims were sanctioned within the stipulated three-month period. Therefore, the appellant was not entitled to interest under Section 11BB, as the refund was not delayed.

The Tribunal rejected the appellant's reliance on judgments that dealt with interest on deposits made under protest or pre-deposits, emphasizing that those precedents were not applicable since the refund in the present case was sanctioned timely.

2. Nature of Amount Reversed: Deposit Under Protest or Pre-deposit?

The appellant contended that the amounts reversed and paid post show cause notices were deposits under protest or pre-deposits, entitling them to interest. The Tribunal analyzed the factual matrix and found that the reversal of Cenvat credit was done after issuance of show cause notices and was not supported by any evidence that it was paid under protest.

It was further observed that the reversal was an act of appropriation of inadmissible credit, not a voluntary deposit made under protest or a pre-deposit under Section 35F of the Act. The Tribunal referred to the record of one appeal where it was explicitly stated that the reversal was an act of appropriation, not a deposit under protest.

Consequently, the Tribunal held that the provisions relating to pre-deposits and deposits under protest, including Section 35FF (which deals with interest on delayed refunds of pre-deposits), were not applicable.

3. Applicability of Sections 35F and 35FF

The Revenue argued that the amounts were pre-deposits under Section 35F and that interest under Section 35FF was not payable as the refund was granted within three months. The Tribunal clarified that Section 35F requires a mandatory pre-deposit for filing appeals, which was not the case here since no appeal was filed against the payments made.

Moreover, the Tribunal emphasized that the amounts were appropriated after show cause notices and not deposited as pre-deposits. Therefore, the provisions of Sections 35F and 35FF did not apply.

4. Judicial Precedents on Deposits Under Protest and Interest on Refunds

The appellant relied heavily on the Madras High Court decision in Commissioner of Central Excise Coimbatore Vs. M/s. Pricol Ltd., which held that deposits made during investigation under protest attract interest and do not constitute unjust enrichment. The Tribunal distinguished the facts of that case, noting that the present matter did not involve deposits made during investigation or under protest but involved reversal of inadmissible credits post show cause notices.

Other precedents cited by the appellant, including CESTAT and High Court decisions, were similarly found to be inapplicable as they pertained to cases where deposits were made under protest or during investigations, unlike the present facts.

The Tribunal also referred to the Supreme Court's ruling in Mafatlal Industries Ltd. Vs. Union of India, which mandates that refund claims and interest must be adjudicated under the provisions of the Central Excise Act, particularly Section 11B and 11BB, and that no other remedy is maintainable.

Further, the Tribunal relied on recent decisions, including a Double Bench CESTAT order and High Court judgments, which reaffirm that interest on refunds is governed strictly by the statutory provisions and that deposits made voluntarily or as appropriations post show cause notices do not attract interest.

5. Treatment of Competing Arguments

The appellant's argument that the amount was a revenue deposit or a pre-deposit and hence entitled to interest was rejected due to lack of evidence and the factual record indicating appropriation rather than deposit under protest.

The Revenue's contention that the refund was timely and no interest was payable was accepted by the Tribunal based on the statutory framework and factual findings.

The Tribunal also rejected the appellant's reliance on case laws that were not factually analogous or legally applicable to the present situation.

6. Application of Law to Facts and Conclusions

The Tribunal applied the statutory provisions governing refund and interest, particularly Sections 11B and 11BB, to the facts that the refund was sanctioned within three months and that the amounts reversed were not pre-deposits or deposits under protest.

It concluded that the appellant was not entitled to interest on the refunded amount as the refund was not delayed and the payments made were not deposits attracting interest provisions.

Significant Holdings:

"The only provision applicable in the given circumstances is Section 11BB. A bare perusal of the provision reveals that the liability of interest on delayed refunds vis-`a-vis amount of duty arises only when the amount is not refunded within three months from the date of receipt of the application/claim. Since admittedly the refund claim was sanctioned within three months from the date of respective application, I am of the view that the appellant is not entitled to claim interest on the amount of refund."

"In view of the fact that the appellant has not been able to demonstrate the reversal of the said inadmissible credit availed and recouped after the issuance of the demand show cause notice, there is no indication to suggest such payments, as having been paid under protest. The obvious conclusion that can be drawn would be that the said amount was paid by the appellant voluntarily post issuance of the show cause notice proposing the recovery of the said inadmissible Cenvat credit."

"There is no provision in the Central Excise Act that deals with payment of interest on revenue deposits. Thus the only provision in the Act about refund and the interest thereupon relate to Section 11, which concerns the recovery of duties not levied or not paid or short levied or short paid or erroneously refunded, or the amount of pre deposit to be made while challenging the order at appellate stage, which may be refunded depending upon the circumstances and facts of the case the appellate authority (along with the interest at such rates as fixed by the Central Government)."

"Since the amount in question was not deposited for the purposes of filing appeal nor it is proved to have been deposited under protest, on the contrary it is observed to be an amount appropriated against the specific proposal made out in the six show cause notices, about reversing the said amount, it can in no way be considered as a Revenue Deposit. The question of applicability of Section 35FF does not thus at all arise."

"The appeals filed are therefore dismissed."