The Hyderabad Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has held that assessees who made mandatory pre-deposits before 6 August 2014 are not entitled to interest from the date of deposit if the refund is sanctioned within the statutory period prescribed under the unamended Section 35FF of the Central Excise Act, 1944. 

Dismissing the appeal, the bench of  P. Dinesha (Judicial Member) and Vasa Seshagiri Rao (Technical Member) reaffirmed that the amended provisions granting interest from the date of deposit apply only to pre-deposits made on or after 6 August 2014. 

The appellant had deposited ₹50 lakh as a pre-deposit in 2009 under the then prevailing provisions of Section 35FF while pursuing an excise appeal. After succeeding before the Tribunal, the company sought refund of the pre-deposit along with interest in January 2025.

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While the departmental authorities sanctioned the refund of the principal amount, they rejected the claim for interest. According to the department, since the pre-deposit had been made before 6 August 2014, the claim was governed by the unamended Section 35FF, under which interest becomes payable only if the refund is not released within three months from the relevant date. As the refund had been granted within the prescribed period, no interest was admissible. 

The appellant argued that although the Tribunal had earlier taken a similar view in Cubex Tubings Ltd., the issue remained open because a writ petition challenging the constitutional validity of the proviso to Section 35FF was pending before the Telangana High Court. The challenge alleged that the proviso was arbitrary, discriminatory and violative of Article 14 of the Constitution.

However, it was also acknowledged that no interim stay had been granted by the High Court against the Tribunal’s earlier decision. 

The Revenue contended that the controversy was no longer res integra. It argued that pre-deposits made before 6 August 2014 continue to be governed by the unamended Section 35FF, which provides for interest only when the refund is delayed beyond three months from the relevant date.

The department relied upon the Delhi High Court’s judgment in Nikhil Thermoplast Ltd. v. CCGST, New Delhi as well as the Tribunal’s earlier ruling in Cubex Tubings Ltd., both of which interpreted the statutory proviso in the same manner. 

The Tribunal observed that the principal issue was whether pre-deposits made before the amendment of Section 35FF should be governed by the amended provision introduced with effect from 6 August 2014 or continue to be regulated by the earlier version of the law.

It noted that there was no dispute regarding the date of the pre-deposit, which had been made in 2009. Consequently, the Tribunal held that the unamended provision necessarily governed the claim. Since the refund had been sanctioned within three months of the refund application, the statutory conditions for payment of interest under the earlier provision were not attracted. 

While deciding the matter, the Tribunal extensively relied on the Delhi High Court’s interpretation of Section 35FF. It noted that the High Court had analysed both the pre-amendment and post-amendment provisions and had specifically recognised that the proviso inserted by the Finance Act, 2014 expressly preserves the applicability of the old law to pre-deposits made before the amendment.

Accordingly, the High Court had held that such assessees are entitled to interest only in accordance with the unamended provision and not from the original date of deposit. The Tribunal observed that its own earlier decision in Cubex Tubings Ltd. had adopted the same interpretation. 

The Tribunal further observed that although the earlier decision in Cubex Tubings Ltd. is presently under challenge before the Telangana High Court, no stay has been granted against its operation. Therefore, the precedent continued to remain binding for deciding identical disputes.

Finding no reason to depart from the settled legal position, the Tribunal upheld the orders of the lower authorities denying interest on the refunded pre-deposit. 

The CESTAT concluded that where a pre-deposit was made prior to 6 August 2014 and the refund is released within the statutory period contemplated under the unamended Section 35FF, no interest is payable. The decision reinforces the distinction maintained by Parliament between pre-deposits made before and after the 2014 amendment and reiterates that the amended interest regime cannot be applied retrospectively to earlier deposits. 

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