EXCISE Appeal No. 10828 of 2021-SM
[Arising out of Order-in-Original/Appeal No AHM-EXCUS-002-APP-013-2021-22 dated
27.07.2021 passed by Commissioner of Central Excise, Customs and Service Tax
AHMEDABAD]
Hasmukh Tobacco Products
VERSUS
Commissioner of Central Excise & ST, Ahmedabad
WITH
EXCISE Appeal No. 10957 of 2021-SM
[Arising out of Order-in-Original/Appeal No AHM-EXCUS-002-APP-27-2021-22 dated
18.10.2021 passed by Commissioner of Central Excise, Customs and Service Tax
AHMEDABAD-I]
Hasmukh Tobacco Products
VERSUS
Commissioner of Central Excise & ST, Ahmedabad
APPEARANCE :
Shri P.P. Jadeja, Consultant for the Appellant
Shri Vijay G Iyengar, Assistant Commissioner (AR) for the Revenue.
CORAM: HON’BLE MR. RAMESH NAIR, MEMBER (JUDICIAL)
DATE OF HEARING : 02.02.2023
DATE OF DECISION: 07.02.2023
FINAL ORDER NO. A/10235-10236 / 2023
RAMESH NAIR :
The issue involved in the present case is whether the appellant is
entitled for interest from the date of deposit of pre-deposit or after the three
months from the date of filing of refund application.
Shri PP Jadeja, learned Consultant appearing on behalf of the appellant
submits that the amount of refund which was granted was deposited as pre
deposit. In case of pre-deposit, the interest is payable right from the date of
pre-deposit which is settled in various judgments relied upon as under:-
(a) CCE, Panchkula vs. Riba Textiles Limited – 2022 (61) GSTL 136
(P&H)
(b) Pr. Commissioner of CGST, New Delhi vs. Emmar MGF
Construction Pvt. Limited – 2021 (55) GSTL 311 (Tri. Del.)
(c) Hawkins Cookers Limited vs. CCE, Chandigarh – 2017 (6) GSTL
308 (Tri. Chan.)
(d) CCE, Kutch (Gandhidham_ vs. Deep Construction Co. – 2019
(365) ELT 532 (Tri. Ahmd.)
(e) Team HR Services Pvt. Limited vs. UOI – 2020 (38) GSTL 457
(Del.)
(f) Ashima Limited vs. CCE & ST., Ahmedabad – 2019 (369) ELT 967
(Tri. Ahmd.)
(g) CCE, Hyderabad vs. ITC Limited – 2005 (179) ELT 15 (SC)
Shri Vijay G Iyengar, learned Assistant Commissioner (AR) appearing
on behalf of the Revenue reiterates the findings of the impugned order.
I have carefully considered the submissions made by both sides and
perused the record. I find that limited issue to be decided is whether the
appellant is entitled for interest from the date of deposit of pre-deposit in a
case where the Tribunal has finally passed the final order setting aside the
demand. I find that on this issue Hon’ble Supreme Court/ High Courts and
this Tribunal has taken a view that in case of pre-deposit, interest should be
given from the date of deposit. Some of the judgments are as under:-
(a) In the case of Riba Textiles Limited (supra) the Hon’ble Punjab &
Haryana High Court observed as under :
“9.
While deciding the issue of interest, Ld. Tribunal has relied upon the law laid
down by the Apex Court in Sandvik Asia Ltd. v. CIT, Pune – 2007 (8) S.T.R. 193 (S.C.)
wherein it was held that :-
“45. The facts and the law referred to in paragraph (supra) would clearly go to
show that the appellant was undisputably entitled to interest under Sections 214
and 244 of the Act as held by the various High Courts and also of this Court. In
the instant case, the appellant’s money had been unjustifiably withheld by the
Department for 17 years without any rhyme or reason. The interest was paid only
at the instance and the intervention of this Court in Civil Appeal No. 1887 of
1992, dated 30-4-1997. Interest on delayed payment of refund was not paid to
the appellant on 27-3-1981 and 30-4-1986 due to the erroneous view that had
been taken by the officials of the respondents. Interest on refund was granted to
the appellant after a substantial lapse of time and hence it should be entitled to
compensation for this period of delay. The High Court has failed to appreciate
that while charging interest from the assessee, the Department first adjusts the
amount paid towards interest so that the principal amount of tax payable remain
outstanding and they are entitled to charge interest till the entire outstanding is
paid. But when it comes to granting of interest on refund of taxes, the refunds
are first adjusted towards the taxes and then the balance towards interest.
Hence as per the stand that the Department takes they are liable to pay interest
only upto the date of refund of tax while they take the benefit of assessee’s funds
by delaying the payment of interest on refunds without incurring any further
liability to pay interest. This stand taken by the respondents is discriminatory in
nature and thereby causing great prejudice to the lakhs and lakhs of assessees.
Very large number of assessees are adversely affected inasmuch as the Income
Tax Department can now simply refuse to pay to the assessees amounts of
interest lawfully and admittedly due to that as has happened in the instant case.
It is a case of the appellant as set out above in the instant case for the
assessment year 1978-79, it has been deprived of an amount of Rs. 40 lakhs for
no fault of its own and exclusively because of the admittedly unlawful actions of
the Income Tax Department for periods ranging up to 17 years without any
compensation whatsoever from the Department. Such actions and consequences,
in our opinion, seriously affected the administration of justice and the rule of law.
COMPENSATION :
- The word ‘Compensation’ has been defined in P. Ramanatha Aiyar’s
Advanced Law Lexicon 3rd Edition 2005 page 918 as follows :
“An act which a Court orders to be done, or money which a Court orders to be
paid, by a person whose acts or omissions have caused loss or injury to another in
order that thereby the person damnified may receive equal value for his loss, or
be made whole in respect of his injury; the consideration or price of a privilege
purchased; something given or obtained as an equivalent; the rendering of an
equivalent in value or amount; an equivalent given for property taken or for an
injury done to another; the giving back an equivalent in either money which is but
the measure of value, or in actual value otherwise conferred; a recompense in
value; a recompense given for a thing received recompense for the whole injury
suffered; remuneration or satisfaction for injury or damage of every description;
remuneration for loss of time, necessary expenditures, and for permanent
disability if such be the result; remuneration for the injury directly and
proximately caused by a breach of contract or duty; remuneration or wages given
to an employee or officer.”
- There cannot be any doubt that the award of interest on the refunded
amount is as per the statute provisions of law as it then stood and on the peculiar
facts and circumstances of each case. When a specific provision has been made
under the statute, such provision has to govern the field. Therefore, the Court has
to take all relevant factors into consideration while awarding the rate of interest
on the compensation.
- This is the fit and proper case in which action should be initiated against all
the officers concerned who were all in charge of this case at the appropriate and
relevant point of time and because of whose inaction the appellant was made to
suffer both financially and mentally, even though the amount was liable to be
refunded in the year 1986 and even prior to. A copy of this judgment will be
forwarded to the Hon’ble Minister for Finance for his perusal and further
appropriate action against the erring officials on whose lethargic and adamant
attitude the Department has to suffer financially.
By allowing this appeal, the Income-tax 49. Department would have to pay a
huge sum of money by way of compensation at the rate specified in the Act,
varying from 12% to 15% which would be on the high side. Though, we hold that
the Department is solely responsible for the delayed payment, we feel that the
interest of justice would be amply met if we order payment of simple interest @
9% p.a. from the date it became payable till the date it is actually paid. Even
though the appellant is entitled to interest prior to 31-3-1986, Learned Counsel
for the appellant fairly restricted his claim towards interest from 31-3-1986 to 27-
3-1998 on which date a sum of Rs. 40,84,906/- was refunded.
The assessment years in question in the 50. four appeals are the assessment
years 1977-78, 1978-79, 1981-82 and 1982-83. Already the matter was pending
for more than two decades. We, therefore, direct the respondents herein to pay
the interest on Rs. 40,84,906 (rounded of to Rs. 40,84,900) simple interest @ 9%
p.a. from 31-3-1986 to 27-3-1998 within one month from today failing which the
Department shall pay the penal interest @ 15% p.a. for the above said period.”
It is not disputed that the provisions of Income-tax Act, 1961 and Central
Excise Act, 1944 are pari materia and, therefore, law laid down by the Supreme Court in
the case of Sandvik Asia Ltd. (supra) shall be applicable to the present case.
Ld. Counsel for the appellant is not in a position to deny the proposition of law
laid down in the case of Sandvik Asia Ltd. (supra) and the applicability thereof to the
facts of the present case.
Consequently, finding no merit in the present case, the instant appeal is
hereby dismissed.”
(b) In the case of Emmar MGF Construction Pvt. Limited (supra), the
Principal Bench of this Tribunal held as under:
“2.
The Revenue is in appeal against the impugned order-in-appeal whereby the
interest @ 6% have been allowed on the amount of deposit, pending litigation, from the
date of deposit till the date of actual refund.
Brief facts of the case are that show cause notice dated 26-12-2008 was issued
alleging non-payment of service tax on registration fees/transfer charges amounting to
Rs. 1,18,19,212/- including cess for the period 1-4-2006 to 30-9-2008, invoking the
extended period of limitation. The appellant was also issued recurring show cause
notices for the subsequent period as follows :-
The aforementioned show cause notices were adjudicated vide order-in
original dated 27-8-2019, whereas the respondent-assessee was successful (demand
dropped). The respondent filed refund claim on 9-10-2019 praying for refund of Rs.
2,47,32,326/- being the amount deposited by them with respect to the aforementioned
show cause notices, which was deposited by the respondent vide debit in the Cenvat
register for the month of October, 2015, was also reflected in the ST-3 return for the
period October, 2015 to March, 2016.
Vide the order-in-original dated 17-1-2020, the Assistant Commissioner
allowed the refund of the principal amount. However, please to reject the interest
claim, observed that the Department has to pay interest, if any, from the date on which
Department was not entitled to hold the amount. In this case Department has issued
deficiency memo dated 24-12-2019 and requisite documents submitted on 9-1-2020
and the refund application was disposed of on 27-1-2020. There is no delay in
sanctioning of the refund claim on the part of the revenue, hence interest is not
payable. Interest was not applicable in the present case, as this is neither the case of any
pre-deposit deposited for filing appeal, nor the refund claim is delayed. Being aggrieved,
the appellant preferred the appeal before the Commissioner (Appeals) who vide the
impugned order has been pleased to grant interest @ 6% from the date of deposit till
the date of refund.
Being aggrieved, Revenue filed the present appeal on the ground that under
the erstwhile Section 35FF (as substituted by way of amendment w.e.f. 6-8-2014),
interest is payable on filing of refund claim, if not granted within three months from the
date of receipt of the appellate order. As the show cause notice was issued to the
assessee prior to 6-8-2014, the erstwhile Section 35FF will be applicable. It is further
urged that the amount deposited in the year 2015 is not by way of pre-deposit, as
defined in Section 35F of the Act. Reliance is placed on the ruling of Hon’ble Gujarat
High Court in the case of Ajni Interiors v. UoI, wherein it has been held that if any
payment is made as a pre-condition for exercising the statutory right, it can be termed
as pre-deposit. However, it cannot be equated with voluntary deposit of Excise duty
paid even during the course of investigation and prior to show cause notice or
adjudication to assert that it is pre-deposit. Further, reliance is placed on the finding of
the Adjudicating Authority.
Opposing the appeal, Learned Counsel Shri Puneet Agrawal urges that the
issue is not longer res integra as the Division Bench of this Tribunal in Parle Agro (P) Ltd.
- Commissioner, CGST – 2021-TIOL-306-CESTAT-ALL, following the ruling of the Apex
Court in Sandvik Asia Ltd. – 2006 (196) E.L.T. 257 (S.C.) = 2007 (8) S.T.R. 193 (S.C.) have
held that such amount deposited during investigation and/or pending litigation is ipso
facto pre-deposit and interest is payable on such amount to the assessee being
successful in appeal, from the date of deposit till the date of refund.
Considering the rival contentions, this appeal by the Revenue is dismissed.
Further, it is directed that the Adjudicating Authority shall disburse the amount of
interest @ 12% per annum forthwith, within a period of 45 days from the date of receipt
of the copy of this order, as held by Division Bench of this Tribunal in Parle Agro (P) Ltd.,
(supra).
Thus, the appeal by Revenue is dismissed with directions as above.”
(c) In the case of Hawkins Cookers Limited (supra), Chandigarh Bench
of this Tribunal passed the following decision :
6.The short issue in hand is before me that :
Issue No. 1
Whether the assessee is required to file the application for refund claim in consequent
to the order of the Hon’ble Apex Court dated 11-12-1996 or not?
Issue No. 2
Whether the amount paid by the assessee under Section 35N of the Act is a pre-deposit
or not?
Issue No. 3
Whether the assessee is entitled to claim interest after three months from the date of
the order of the Hon’ble Apex Court dated 11-12-1996 till its realization or not?
I have gone through the issue no. 1 whether the assessee is required to file an
application for refund claim to the order of Hon’ble Apex Court on 11-12-1996 or not?
I have gone through the C.B.E. & C. Circular No. 802/35/2004-CX., dated 8-12-
2004, the relevant contents of the circular reproduced as under :
- Accordingly, the contents of the circular no. 275/37/2000-CX. 8A, dated 2-1-
2002 [2002 (139) E.L.T. T38] as to the modalities for return of the pre-deposits
are reiterated. It is again reiterated that in terms of Hon’ble Supreme Court’s
order such pre-deposit must be returned within 3 months from the date of the
order passed by the Appellate Tribunal/Court or other Final Authority unless
there is a stay on the order of the Final Authority/CESTAT/Court, by a superior
Court.
On going through the C.B.E.&C. Circular No. 802/35/2004-CX., dated 8-12-2004
which has been certified that the amount of pre-deposit is required to be refunded
within three months of the order passed by the Appellate Court/Court or other Final
Authority, by a superior Court and there is no requirement to file refund application.
Admittedly there is no stay of the order dated 11-12-1996 passed by the Hon’ble Apex
Court. In terms of the C.B.E. & C. Circular, dated 8-12-2004, the assessee is not required
to file any application for refund. In these terms the issue no. 1 is answered in favour of
the assessee.
I have gone through the Issue No. 2, Whether the amount paid by the assessee
under Section 35N of the Act is a pre-deposit under Section 35F of the Central Excise Act
or not?
The said issue came up before the Hon’ble High Court of Gujarat in the case of
Ghaziabad Ship Breakers Ltd. (surpa) wherein the Hon’ble High Court observed as under
:
- Another aspect of the matter is that under Section 129E of the Act in case of
any appeal under the chapter, the person desirous of appealing against an order
relating to any duty and interest demanded in respect of goods which are not
under the control of the customs authorities or any penalty levied under the Act,
is required to deposit with the proper officer on duty and interest demanded or
penalty levied. Section 129E of the Act falls under Chapter XV under the heading
Appeals. Chapter XV of the Act is comprised of various provisions from Section
128 to Section 131C of the Act. Section 130 of the Act which provides for appeal
to High Court and Section 130E of the Act which provides for appeal in Supreme
Court also fall under Chapter XV. Thus, an appeal before the Supreme Court
would also be an appeal under the said Chapter as envisaged under Section 129E
of the Act. Thus, any amount deposited during the pendency of an appeal before
the High Court or the Supreme Court would also be by way of deposit under
Section 129E of the Act and has to be treated accordingly.
On going through the order of the Hon’ble High Court of Gujarat, I find that
the Hon’ble High Court has held that any amount of pre-deposit during the pendency of
the appeal is a amount of pre-deposit and the same is to be treated accordingly,
therefore, I hold that the amount of pre-deposit paid by the assessee under Section 35N
is equivalent to the amount paid under Section 35F of the Act and the same is to be
treated as pre-deposit accordingly. Moreover, in the adjudication order, the refund
claim of the assessee was sanctioned treating the said amount as pre-deposit of Section
35F of the Act, therefore, the said issue cannot be raised by the Revenue at this stage
and this issue has also answered in favour of the assessee.
I have gone through the Issue No. 3 whether the assessee is entitled to claim
interest after three months from the date of the order of the Hon’ble Apex Court dated
11-12-1996 till its realization or not in the facts of the circumstances of the case?
The contention of the Revenue is that the assessee is required to file the
application for refund which has been negated by the C.B.E. & C. Circular, dated 8-12-
2004 wherein it has been stated that the refund claim is to be sanctioned within three
months from the date of order of Appellate Court. In this case, it has been held that
there is no requirement to file application for refund but the ld. AR heavily relied on the
decision of Ranbaxy Laboratories Ltd. (supra). The facts of the said case are not relevant
to the facts of the case in hand. In fact, in the said case, the assessee file rebate claim of
duty paid on the export of the goods and the Hon’ble Apex Court held that the interest
is payable to refund after three months of the date of the application. In the said case, it
was not the issue before the Hon’ble Apex Court whether in pursuant to the order
passed by the Appellate Court, the assessee required to file application for refund claim
or not, therefore, the facts of the said case are not applicable to the facts of this case
and the assessee is not required to file any application for refund claim. Admittedly, the
C.B.E. & C. Circular clarifies that the refund claim is to be sanctioned within 3 months
from the date of order of the Appellate Court, therefore, any delay in refund the
assessee is entitled for interest after 3 months of the order. The same view has been
taken by the Hon’ble High Court of Calcutta in the case of Madura Coats Ltd. (supra)
wherein the Hon’ble High Court observed as under :
- The decision of the Supreme Court in the case of the Commissioner of
Central Excise v. ITC Limited (supra) as regards refund of amount deposited under
Section 35F was governing the field as the Supreme Court has upheld the
direction for payment of interest and quantified it to be @ 12% per annum. The
issue before the Supreme Court was whether the pre-deposit made as pre
condition for the hearing of appeal under the Central Excise Act, 1944 was, on
the assessee being ultimately successful, refundable to the assessee with interest
as there was no provision in the Central Excise Act for payment of interest on
such refund. It is in the course of hearing before the Supreme Court that the
Learned Solicitor General after taking instructions made a statement that the
Central Board of Excise and Customs proposes to issue a circular in connection
with the payment of interest on all such pre-deposits. At the time a draft copy of
the proposed circular was handed over to the Supreme Court there was no rate of
interest specified in the proposal and, therefore, the Supreme Court awarded
interest @ 12% per annum. Therefore, when this Court directed the respondent
to pay interest to the appellant in terms of the Circular Bearing No. 802/35/204-
CX., dated 8-12-2004 on the pre-deposit of the delayed refund within two months
from today it has to be constructed that this court meant the rate of interest
which was awarded by the Supreme Court in the case of Commissioner of Central
Excise v. ITC Limited which was the rate quantified by the Supreme Court in the
absence of any statutory provisions in the said Act.
- Therefore, in view of the fact that the period for which the petitioner is
entitled to interest on the pre-deposit of the delayed refund was the same as in
the case of Commissioner of Central Excise v. ITC Ltd. (supra) parity demands that
the petitioner is also entitled for interest @ 12% per annum.
- In so far as the contention of the Revenue that the Central Government is the
only authority to fix the rate of interest and that Section 35FF was brought in by
providing rate of interest on payment of pre-deposit delayed refund and
quantified the rate of interest to be the same as in Section 11BB would not apply
to the petitioner’s case as Section 35FF has been introduced in the Act by way of
an amendment inserted with effect from May 10, 2008 by Section 85 of the
Finance Act, 2008 (18 of 2008). Therefore, we clarify that the petitioner is entitled
to interest @ 12% per annum on the amount of refund. We direct that such
interest shall be paid by the respondent/Revenue within two months on the date
of this order.
Further, I find that it has been objected by the Revenue that provisions of
[Section] 35F are not applicable to the facts of this case. This issue has been considered
by the Hon’ble High Court in the case of Madura Coats Ltd. (supra) and held that
although the provisions of [Section] 35FF of the Act are not in the statute book during
the relevant time but the same are applicable for interest for delayed refund. The said
order of the Hon’ble High Court has been affirmed by the Hon’ble Apex Court.
In these terms, I hold that the assessee is entitled for interest after three
months from the date of 11-12-1996 till the amount of refund is realised in terms of the
decision of the Hon’ble High Court in the case of Madura Coats Ltd. (supra).
With these terms the appeal filed by the assessee is allowed with
consequential relief and appeal filed by the Revenue is dismissed.”
(d) In the case of Team HR Services Pvt. Limited, identical issue of
payment of interest of refund of deposit made during investigation, the
Hon’ble Delhi High Court passed the following order:
“17. We are unable to find any justification for the respondents to retain the said
amount of Rs. 2,38,00,000/-. We have thus enquired from the Counsel for the
respondents, what should be the rate of interest for which the respondents should be
held liable.
- The Counsel for the respondents states that as per the statute, the respondents
are liable for interest @ 6% per annum only.
- Per contra, the Counsel for the petitioner has drawn attention to :
(A)
Sandvik Asia Ltd. v. Commissioner of Income Tax-I, Pune, (2006) 2 SCC 508
= 2006 (196) E.L.T. 257 (S.C.) where interest @ 9% per annum was awarded;
(B)
Surinder Singh v. Union of India, 2006 SCC OnLine Del 1863 (DB) = 2006
(204) E.L.T. 534 (Del.) where interest @ 12% per annum was granted on delayed
refund;
(C)
Hello Minerals Water (P) Ltd. v. Union of India, 2004 SCC OnLine All 2187
(DB) = 2004 (174) E.L.T. 422 (All.) where interest @ 10% per annum was granted;
(D)
Hindustan Coca-Cola Beverages Pvt. Ltd. v. Union of India, 2013 SCC
OnLine Guj 1487 (DB) = 2015 (324) E.L.T. 299 (Guj.) where interest @ 9% per
annum and future interest @ 6% per annum was granted; and,
(E)
Ebiz.com Pvt. Ltd. v. Commissioner of Central Excise, Customs & S.T., 2017
(49) S.T.R. 389 (All.) where costs of Rs. 50,000/- were imposed on the
Department.
- In the present case, as aforesaid, the amount of Rs. 2,38,00,000/- was deposited
by the petitioner of its own volition, during the audit/investigation, though under
protest and the petitioner has not chosen to detail the circumstances in which the
petitioner felt compelled to make the deposit. The petitioner for the first time sought
refund of the said amount vide letter dated 2nd May, 2018.
- Considering the said facts, we do not find the petitioner entitled to interest at any
higher rate than @ 6% per annum from the date of deposit i.e. 27th October, 2006 till
the end of May, 2018 i.e. 31st May, 2018. However, we do not find any justification for
the respondents retaining the said amount thereafter and find the respondents liable
for interest with effect from 1st June, 2018 onwards and till date @ 7.5% per annum.
While so enhancing the rate of interest, we have also taken into consideration the non
compliance by the respondents of the orders of this Court as detailed above, leading to
a contempt notice being issued to the respondents and in response whereto Ms.
Niharika Gupta, Assistant Commissioner in the Office of Division-Nehru Place, Central
GST, Delhi East Commissionerate is present in the Court.
- The respondents are expected to at least now, on or before 15th July, 2020 refund
the amount of Rs. 2,38,00,000/- with interest @ 6% per annum from 1st November,
2006 to 31st May, 2018 and with interest @ 7.5% per annum from 1st June, 2018 till the
date of refund on or before 31st July, 2020. However, if the said amount is not refunded
by 15th July, 2020, the rate of interest with effect from 1st August, 2020 shall stand
enhanced to 12% per annum. A mandamus to the said effect is issued to the
respondents GST Department.”
In view of the above judgments, it is settled that the appellant are
entitled for the interest on refund of pre-deposit amount @6% from the date
of deposit till the date of refund. Accordingly, the impugned orders are set
aside, appeals are allowed with consequential relief.
(Pronounced in the open court on 07.02.2023)
(Ramesh Nair)
Member (Judicial)
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