The Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Kolkata Bench, has ruled that taxpayers are entitled to interest at the statutory rate of 6% per annum on refunds of pre-deposits made under Section 35F of the Central Excise Act, 1944, rejecting an appeal seeking a higher rate of 12%.
The bench of K. Anpazhakan (Technical Member) has observed that the applicable notification issued under Section 35FF clearly prescribes a 6% interest rate, leaving no scope for enhancement merely because an earlier Tribunal order had referred to a higher rate in different circumstances.
The Appellant/assessee challenged an order of the Commissioner (Appeals) that had upheld the grant of interest at 6% per annum on the refund of a pre-deposit amounting to ₹16.18 lakh. The company contended that it was entitled to interest at 12% per annum from the date of deposit until the date of refund.
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The dispute arose after the Tribunal, through its final order dated 11 August 2023, allowed the refund of the pre-deposit made by the company while pursuing its appeal. Although the department refunded the principal amount of ₹16,18,165, it initially declined to grant any interest on the delayed refund.
The company thereafter approached the Tribunal, which led to another order dated 23 October 2024. Pursuant to that order, it filed an application claiming interest at 12% per annum for the period from 11 November 2014 to 4 October 2023, when the refund was eventually made.
The Assistant Commissioner subsequently sanctioned interest, but only at the rate of 6% per annum, relying on Notification No. 24/2014-C.E. (N.T.) dated 12 August 2014. This decision was affirmed by the Commissioner (Appeals), prompting the present appeal before the Tribunal.
The appellant argued that an earlier Tribunal order had already granted 12% interest by relying on the Punjab and Haryana High Court’s decision in Riba Textiles Ltd. It further submitted that since the Revenue had not challenged that order, it had attained finality and the department was bound to pay interest at the higher rate.
The department maintained that the refund related specifically to a mandatory pre-deposit under Section 35F of the Central Excise Act. It argued that Section 35FF, read with Notification No. 24/2014-C.E. (N.T.), expressly fixes the rate of interest on such refunds at 6% per annum. Consequently, the authorities had correctly granted interest in accordance with the statutory framework.
The tribunal observed that the refund in question was not an ordinary refund claim but one arising from a pre-deposit made as a condition for filing an appeal under Section 35F.
The Tribunal emphasized that Notification No. 24/2014-C.E. (N.T.), issued under Section 35FF of the Central Excise Act, unequivocally prescribes 6% per annum as the applicable rate of interest on refunds of such pre-deposits. It also referred to CBEC Circular No. 984/8/2014-CX dated 16 September 2014, which reiterates that the prescribed rate of interest on refunds under Section 35FF is 6% per annum.
The Bench held that once the statute and the notification expressly specify the applicable interest rate, there is no legal basis for awarding interest at 12% merely because an earlier order had referred to a higher rate in another context. The statutory notification governs refunds of pre-deposits and must prevail.
Holding that the Commissioner (Appeals) had correctly applied the statutory provisions, the Tribunal found no infirmity in the order granting interest at 6% per annum. It therefore rejected the appeal and declined the taxpayer’s request for payment of interest at the enhanced rate of 12%.
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