12% Interest On Excise Refund Can’t Be Claimed As A Matter Of Right : CESTAT

The Allahabad Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has ruled that interest at the rate of 12% on excise refunds cannot be claimed as a matter of right and must strictly conform to the statutory provisions of Section 11BB of the Central Excise Act, 1944. The bench of Sanjiv Srivastava (Technical Member) has dismissed the appeal seeking a higher rate of interest on a refunded amount, holding that the refund in question was governed by the statutory scheme applicable to excise duty and not by principles of equity or compensation. Sheela Foam Ltd., a manufacturer of PU foam mattresses falling under Chapter 39 of the Central Excise Tariff Act, 1985, was availing CENVAT credit under the CENVAT Credit Rules, 2004. In August 2009, a fire accident occurred at the company’s factory, destroying both semi-finished and finished goods. The incident was duly reported to the excise authorities. Subsequently, the company reversed CENVAT credit amounting to ₹41.01 lakh relating to the inputs contained in the goods destroyed in the fire. The appellant thereafter applied for remission of duty under Rule 21 of the Central Excise Rules, 2002. However, the Department rejected the remission claim and confirmed a demand of ₹40.97 lakh along with interest, also demanding interest on the reversed CENVAT credit. After prolonged litigation, the Tribunal, through Final Order No. 70132/2022 dated 2 August 2022, read with Miscellaneous Order No. 70131/2023 dated 16 November 2023, allowed the assessee’s claim, holding that the appellant was entitled to refund of ₹35,60,087. Pursuant to this, Sheela Foam filed a refund application on 13 December 2023. The Commissioner (Appeals), CGST, Noida, sanctioned the refund along with interest at the rate prescribed under Section 11BB of the Central Excise Act, payable from the date of deposit till the date of actual refund. Aggrieved by the rate of interest, the appellant approached CESTAT seeking interest at 12% per annum, contending that the amount refunded was in the nature of a revenue deposit and not duty. Reliance was placed on a series of Tribunal decisions, including Parle Agro Pvt. Ltd., Continental Engines Pvt. Ltd., and Indore Treasure Market City (P) Ltd., which in turn relied on the Supreme Court judgment in Sandvik Asia Ltd. The Tribunal rejected the appellant’s contention, observing that the amount reversed by the assessee represented central excise duty attributable to inputs used in goods destroyed by fire. Since remission was sought and ultimately granted under Rule 21, the refund clearly fell within the ambit of Section 11B of the Central Excise Act, making Section 11BBapplicable for interest on delayed refund. The Bench noted that the decisions relied upon by the appellant primarily dealt with amounts deposited during investigation or pre-deposit, which stood on a different footing from statutory duty refunds. Importantly, the Tribunal relied on the Supreme Court’s ruling in Willowood Chemicals Pvt. Ltd. , wherein the apex court clarified that the judgment in Sandvik Asia Ltd. cannot be read as a general rule for granting interest beyond statutory limits, particularly where the delay is not inordinate. Holding that statutory provisions must prevail over equitable considerations, the Tribunal concluded that interest on the refund was rightly restricted to the rate notified under Section 11BB. The demand for 12% interest was found to be legally unsustainable. Accordingly, the appeal filed by Sheela Foam Ltd. was dismissed, and the order of the Commissioner (Appeals) granting interest at the statutory rate was upheld. Case Details Case Title: M/s Sheela Foam Ltd. Versus Commissioner, Central Excise & CGST, Noida Case No.: Excise Appeal No.70686 of 2025 Date: 02.02.2026 Counsel For Appellant: Pravin Sharma, Advocate Counsel For Respondent: Manish Raj, Authorized Representative Click Here To Read Order Read More: Alleged Hawala Networks Linked to China–India Business Under Scrutiny; Students and Private Employees Among Suspected Operators

12% Interest On Excise Refund Can’t Be Claimed As A Matter Of Right : CESTAT

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