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2025 (6) TMI 429 - AT - Central ExciseEntitlement for interest on refund amount for 15 days only and not from the date of initial deposit - principles of unjust enrichment - HELD THAT - This issue has recently been considered by the Division Bench of this Tribunal in the case of M/s Crystal Crop Protection Ltd vs. Commr of CGST Jammu 2025 (5) TMI 1993 - CESTAT CHANDIGARH wherein the Division Bench of the Tribunal has rejected the appeal of the assessee-appellant who claimed interest from the date of deposit till the date of refund is made. The Division Bench of the Tribunal after considering the judgment of Hon ble High Court of Delhi in the case of Goldy Engineering Works 2023 (7) TMI 715 - DELHI HIGH COURT which has been affirmed by the Hon ble Apex Court 2025 (4) TMI 1186 - SC ORDER has held that the assessee-appellant is not entitled to interest from the date of deposit but is entitled to interest as per the provisions prescribed under Section 11BB or Section 35FF. The present case is covered by the judgment of the Hon ble High Court of Delhi in the case of Goldy Engineering Works which stands affirmed by the Hon ble Apex Court as well as the judgment of jurisdictional High Court of Punjab Haryana in the case of Bata India Ltd. Therefore by following the ratios of the above said judgments the appellant is not entitled to interest from the date of deposit till the refund is made. Conclusion - i) Interest on delayed refunds under Central Excise law is payable only if refund is delayed beyond three months from the date of receipt of a formal refund application under Section 11B. ii) Deposits made under protest pursuant to court orders are distinct from pre-deposits under Section 35F and attract interest provisions under Section 11BB not Section 35FF. iii) Refund claims require formal applications with declarations to avoid unjust enrichment. There are no infirmity in the impugned order - appeal dismissed.
The core legal questions considered by the Tribunal in this appeal are:
1. Whether the appellant is entitled to interest on the refund amount from the date of initial deposit of the disputed duty till the date of actual refund, or only for the statutory period of 15 days as held by the Commissioner (Appeals). 2. The applicability and interpretation of Sections 11B and 11BB of the Central Excise Act, 1944, regarding the grant of interest on delayed refunds. 3. The distinction between deposits made under protest or as pre-deposits during appeals and refund claims under the statutory provisions. 4. The effect of judicial precedents, including recent decisions of the Supreme Court and High Courts, on the entitlement to interest on refunds in such cases. Issue-wise Detailed Analysis Issue 1: Entitlement to Interest from Date of Deposit vs. Date of Refund Application The appellant contended that since the amount of Rs. 3,78,279/- was deposited under protest as per the Supreme Court's interim order and was never actually payable, they are entitled to interest from the date of deposit till the refund is made. The appellant argued that the department enjoyed the amount for over a decade and interest is compensatory in nature, thus justifying the claim. The department countered that the refund application was filed under Section 11B of the Central Excise Act, 1944, and interest on delayed refunds is governed strictly by Section 11BB. The department emphasized that interest is payable only if the refund is not granted within three months from the date of receipt of the refund application, and not from the date of deposit. The department relied on authoritative Supreme Court decisions to support this position. The Tribunal referred extensively to a recent Division Bench decision of the Tribunal in M/s Crystal Crop Protection Ltd vs. Commissioner of CGST, Jammu, which rejected claims for interest from the date of deposit. The Tribunal also relied on the judgment of the Delhi High Court in Goldy Engineering Works, which was affirmed by the Supreme Court. This judgment clarified that interest on delayed refunds is payable only from the date of receipt of a formal refund application under Section 11B, not from the date of deposit made under protest or as a pre-deposit during appeals. The Tribunal highlighted the distinction between deposits made under protest or as pre-deposits under Section 35F and refund claims under Section 11B. Section 11B requires a formal refund application and governs interest under Section 11BB, which fixes interest only if refund is delayed beyond three months from the date of application receipt. Section 35FF, dealing with pre-deposits during appeals, mandates interest from the date of the appellate order but does not require a refund application. The Tribunal further noted that the appellant's deposit was made pursuant to the Supreme Court's direction and not as a pre-condition for filing an appeal under Section 35F. Therefore, the refund claim falls under Section 11B and interest entitlement must be governed by Section 11BB. The Tribunal also emphasized the policy rationale that a refund claim is distinct from a pre-deposit and requires a formal application with a declaration that the tax burden has not been passed on, to avoid unjust enrichment. Mere pendency of appeal or stay orders does not negate the requirement of a refund application under Section 11B. Issue 2: Interpretation of Sections 11B and 11BB of the Central Excise Act, 1944 Section 11B(1) mandates that any person claiming refund of duty must make a formal application. Section 11BB prescribes that interest is payable if the refund is not granted within three months from the date of receipt of such application. The interest rate is fixed by the Central Government notification. The Tribunal relied on the authoritative interpretation by the Delhi High Court and Supreme Court that these provisions are exhaustive and exclusive regarding interest on refunds of duty. Interest cannot be claimed from the date of deposit unless it falls under Section 35FF (pre-deposits during appeals), which is not applicable here. The Tribunal also referred to the judgment of the Punjab & Haryana High Court in Bata India Ltd, which held that interest is payable only after expiry of three months from the date refund becomes due under the relevant statutory provisions. This further supports the position that interest is not payable from the date of deposit but only from the date of application and subsequent delay. Issue 3: Distinction Between Deposit Under Protest and Pre-deposit During Appeal The appellant argued that the amount was deposited under protest and hence should be treated differently from pre-deposits under Section 35F. The Tribunal agreed that there is a clear legal distinction. Deposits made as a pre-condition for filing an appeal under Section 35F are not considered "duty" and attract interest under Section 35FF from the date of the appellate order. Conversely, deposits made under protest pursuant to a court order do not fall under Section 35FF. The Tribunal underscored that refund claims arising from deposits under protest must comply with Section 11B and interest is governed by Section 11BB, which requires a refund application and interest is payable only if refund is delayed beyond three months from the date of application receipt. This distinction was supported by the Board's Circular and judicial precedents, which clarify that a deposit under protest or pursuant to a court order is distinct from a pre-deposit under Section 35F and the legal consequences differ accordingly. Issue 4: Effect of Judicial Precedents The Tribunal extensively relied on the following precedents:
These decisions collectively establish that interest on delayed refunds is strictly governed by Sections 11B and 11BB of the Central Excise Act, 1944, and interest entitlement arises only if refund is delayed beyond three months from the date of receipt of a formal refund application. Deposits made under protest or as pre-deposits during appeals are treated differently under the law, with interest provisions under Section 35FF applicable only to pre-deposits. The Tribunal noted that the Supreme Court has affirmed the Delhi High Court's ruling in Goldy Engineering Works, making the interpretation the law of the land and settling the controversy regarding the timing of interest entitlement on refunds. Conclusions The Tribunal concluded that the appellant is not entitled to interest on the refund amount from the date of deposit till the date of refund. Interest is payable only if the refund is delayed beyond three months from the date of receipt of the refund application under Section 11B, as prescribed by Section 11BB. The appellant's claim for interest from the date of deposit is not sustainable in law. The impugned order passed by the Commissioner (Appeals), which restricted interest entitlement to 15 days only and denied interest from the date of deposit, is upheld. The appeal is dismissed accordingly. Significant Holdings The Tribunal reproduced and relied on the following crucial legal reasoning from the Goldy Engineering Works judgment, affirmed by the Supreme Court: "Section 11B(1) in clear and unambiguous terms contemplates the making of an application for refund being made by any person claiming refund of any duty of excise and interest paid on such duty... The subject of interest on delayed refund which is governed by Section 11BB itself prescribes the starting point for payment of interest on delayed refunds to be the date when an application under Section 11B(1) is received... interest on delayed refund is clearly dependent upon the making of a formal application as stipulated by Section 11B of the 1944 Act." "A refund of duty and interest paid thereon is liable to be viewed as distinct from a pre-deposit that may be made in compliance with Section 35F of the 1944 Act... a pre-deposit made as a condition of filing an appeal is in any case not considered to be 'duty' even by the respondents." "Section 35FF... stipulates that interest would commence from the date of the order of the Appellate Authority as distinct from the making of an application which is prescribed to be the starting point insofar as Section 11BB of the 1944 Act is concerned." "Absent a declaration that the burden of tax has not been passed on, any refund that may be made would itself amount to the assessee being unjustly enriched... This too appears to reinforce the imperatives of an application being formally made before a claim for refund is considered." "A levy of interest on refund must undoubtedly follow where it is found that the amount has been unjustifiably retained or remitted with undue delay... The solitary question which stands raised in these matters is the date from which that interest would flow." Core principles established include:
The Tribunal's final determination was to dismiss the appellant's appeal and uphold the impugned order denying interest from the date of deposit, thereby confirming that interest is payable only as per the statutory provisions from the date of refund application receipt and subsequent delay.
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