1. The instant Appeal has been filed by the Department Order-in-Appeal dated 16/1/18 passed by the Commissions appeals CGST Jaipur. The issue involved in this Appeal is whether the Appellant is liable to pay interest on delayed sanction of relevant amount of Rs. 50 lakh pre-deposited by the Respondent under Section 35F, after three months from the Tribunal's Final Order dated 23/3/06 in terms of provisions of Section 35 FF of the Central Excise Act, 1944.
2. The brief facts of the matter are that the Respondent are the manufacturer of Pharmaceuticals Products falling under Chapter Heading 30 of the First Schedule to the Central Excise Tariff Act, 1985. Four Show Cause Notices were issued to the Appellants for the period from 1998 to 30/06/04 alleging that they were not entitled for the benefit of Notification No. 06/2002 - CE. The Adjudicating Authority i.e. Commissioner (Appeals) vide Order-in-Original dated 28/09/05 confirmed the demand of Rs. 3,80,11,106/- alongwith interest and penalty. Being aggrieved the Respondent filed Appeal before this Tribunal in the year 2006 being Appeal No. 15/17 of 2006. This Tribunal vide stay Order dated 15/2/06 directed the Respondent to pre-deposit Rs. 50 lakh under Section 35F of the Central Excise Act, 1944 as a condition for hearing the Appeal and the same was deposited by the Respondent through Challan on 14/3/2006. The said Appeal was finally decided by this Tribunal vide final Order dated 21/3/2006 remanding the matter back to the Adjudicating Authority for deciding the matter afresh. I have been informed that upon remand the matter is still pending before the Commissioner (Appeals). I have also been informed by the ld. Counsel for the Respondent that for the subsequent years similar issue has already been decided in favour of the Respondent by Commissioner (Appeals), Jaipur-I and the Appeal against that Order had already been dismissed by this Tribunal.
3. On 30/11/2015, the Respondent wrote letter and requested the Department for refund of pre-deposit of Rs. 50 lakh alongwith interest which was deposited by the Respondent on 14/03/06 incompliance with the stay Order dated 15/2/2006 of this Tribunal. The Department issued a Show Cause Notice dated 25/2/2016 denying the refund claimed saying that it is barred by limitation under Section 11B of the Central Excise Act, 1944. The Adjudicating Authority vide Order-in-Original dated 4/3/2016 rejected the refund claimed by the Respondent on the ground of limitation.
4. On Appeal filed by the Respondent, the Commissioner (Appeals) vide impugned order dated 16/1/18 allowed the Appeal filed by the Respondent inter-alia holding that:
i) The claim for refund of pre-deposit of Rs. 50 lakhs was not barred by limitation as prescribed in Section 11AB of the Act as these provisions do not apply to refunds of pre-deposit.
ii) There is no requirement of filing of application for the refund of pre deposit, as held by various judicial decisions as well as in the light of CBEC Circular dated 2/1/2002 and 8/12/2004 respectively.
iii) The provisions of Section 35FF regarding interests on pre deposits although introduced w.e.f. 10/5/18 but it would apply for all refunds including the refunds of pre-deposit made prior to that date. Therefore, interest at the rate specified in Section 11BB of the Act is to be granted after the expiry of three months from the date of communication of Tribunal's final Order dated 21/3/2006 till the date of refund of such amount.
5. We have heard ld. AR for the Appellant and ld. Advocate of the Respondent and peruse the record. In order to appreciate the issue involved in this matter, it is relevant to go through Section 35F and 35FF and Circular dated 2/1/2002 and 8/4/2004 of CBEC which are reproduced under:
"Section 35F. Deposit, pending appeal, of duty demanded or penalty levied - Where in any appeal under this Chapter, the decision or order appealed against relates to any duty demanded in respect of goods which are not under the control of Central Excise authorities or any penalty levied under this Act, the person desirous of appealing against such decision or order shall, pending the appeal, deposit with the adjudicating authority the duty demanded or the penalty levied:
Provided that where in any particular case, [Commissioner (Appeals)] or the Appellate Tribunal is of opinion that the deposit of duty demanded or penalty levied would cause undue hardship to such person, the subject to such conditions as he or it may deem fit to impose so as to safeguard the interests of revenue.
[Provided further that where an application is filed before the Commissioner (Appeals) for dispensing with the deposit of duty demanded or penalty levied under the first proviso, the Commissioner (Appeals) shall, where it is possible to do so, decide such application within thirty days from the date of its filing.]
[Explanation - For the purposes of this section "duty demanded" shall include, -
(i) amount determined under section 11D;
(ii) amount of erroneous Cenvat credit taken;
(iii) amount payable under rule 57CC of Central Excise Rules, 1944;
(iv) amount payable under rule 6 of Cenvat Credit Rules, 2001 or Cenvat Credit Rules, 2002 or Cenvat Credit Rules, 2004;
(v) interest payable under the provisions of this Act or the rules made there under.]
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Section 35FF Interest on delayed refund of amount deposited under the proviso to section 35F - Where an amount deposited by the appellant in pursuance of an order passed by the Commissioner (Appeals) or the Appellate Tribunal (hereinafter referred to as the appellate authority), under the first proviso to Section 35F, is required to be refunded consequent upon the order of the appellate authority and such amount is not refunded within three months from the date of communication of such order to the adjudicating authority, unless the operation of the order of the appellate authority is stayed by a superior court or tribunal, there shall be paid to the appellant interest at the rate specified in section 11BB after the expiry of three months from the date of communication of the order of the appellate authority, till the date of refund of such amount.
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Circular: 275/37/2K-CX 8A dated 02 Jan 2002 - In order to attain uniformity and to regulate such refunds it is clarified that refund applications under Section 11B(1) of the Central Excise Act, 1944 or under Section 27(1) of the Customs Act, 1962 need not be insisted upon. A simple letter from the person who has made such deposit requesting the return of the amount, along with an attested Xerox copy of the Order-in-Appeal or CEGAT order consequent to which the deposit made becomes returnable and an attested Xerox copy of the Challan in Form TR6 evidencing the payment of the amount of such deposit, addressed to the concerned Assistant/Deputy Commissioner of Central Excise or Customs, as the case may be, will suffice for the purpose. All pending refund applications already made under the relevant provisions of the Indirect Tax Enactments for return of such deposits and which are pending with the authorities will also be treated as simple letters asking for return of the deposits, and will be processed as such. Similarly, bank guarantees executed in lieu of cash deposits shall also be returned.
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Circular: 802/35/2004-CX dated 08 Dec 2004 - The Board has taken a strict view with regard to non-returning of such deposits. The Board has noted the observations of the Hon'ble Supreme Court in its order dated 21/09/2004 and has decided that pre deposits shall be returned within a period of three months of the disposal of the appeals in the assessee's favour. 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."
6. The ld. AR for the Appellant although did not dispute about the refund of duty and it has been specifically mentioned in the grounds of Appeal that the application for refund of pre-deposit was not barred by time as per Section 11B, however as per the Circulars dated 2/1/02 and 8/12/04 for getting refund of the pre-deposit, the assessee was required to file an application to the jurisdictional AC/DC after the Order of the Tribunal dated 21/3/06 and since the Respondent filed the said application for refund on 30/11/15, therefore, the Respondent can claim interest only from the date they made the application i.e. from 30/11/15. The ld. AR further submitted that the Section 35FF has been inserted only on 10/05/08 and therefore it has no application on the pre-deposit that arose prior to its insertion.
7. Section 35FF of the Act provides that where an amount of deposit by the Respondent in pursuant of an Order passed by the Commissioners (Appeals) or Appellant Tribunal under the first proviso of Section 35F is required to be reviewed consequent upon the Final Order of the Appellant Authority and such amount is not reviewed within three months from the date of communication of such Order to the Adjudicating Authority, the interest at the rate specified in Section 11BB after the expiry of three months from the date of communication of the Order till the date of the refund should be paid along with the refund of deposit. Undoubtedly, the said provision has come into force w.e.f. 10/05/08, nevertheless, the principle which sought to be communicated under the said provision of law would apply to every case where the amount is illegally withheld. Before the introduction of Section 35FF in the statute, there was no provision governing liability to pay interest on delayed refund of pre-deposit. However, with the introduction of 35FF in the Act, a statutory right has been created in favour of the claimants, to automatically become liable to get the refund of pre-deposit and also, interest if not paid within the time limit prescribed there. I am in complete agreement with the finding of the ld. Commissioner (Appeals) that Section 35FF would apply to all refunds of pre-deposit pending on the date of its insertion and as it itself states that liability to interest starts three months from the Order of Appellate Authority, the relevant date is not the date when Section 35FF was inserted, but the date of the Order of the Appellate Authority.
8. A similar issue was decided in favour of the claimant in the matter of Madura Coats
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Pvt. Ltd. v. Commissioner : 2012 (285) E.L.T. 188 (Cal.) and later on affirmed by the Hon'ble Supreme Court in the matter of Commissioner v. Madura Coats Ltd. reported in : 2014 (301) E.L.T. 161(SC). These were followed by this Tribunal in the matter of Hawkins Cooker Ltd. v. CCE, Chandigarh : 2017(6) GSTL 308 (Tri.-Chan.) in which it was held that the assessee is entitled for interest after three months from the date of 11/12/1996 till the amount of refund is realized in terms of the decision of the Hon'ble High Court in the case of Madura Coats Limited (supra). Similarly, this Tribunal in the matter of Commr. of C. Ex. & S.T., Panchkula v. Sainsons Paper Industry Limited reported in : 2016 (332) E.L.T. 351 (Tri.-Del.) has held that it can be said that prior to 10/05/08, i.e. before introduction of 35FF, the Respondent was entitled to get refund of pre-deposit, as per Board Circulars even without submitting an application and was also entitled to interest for delayed refund as per the dictum laid down by the Hon'ble Supreme Court in the matter of CCE, Hyderabad v. ITC Limited reported in 2005(179) E.L.T. 15(SC). In view of the above, the Appeal filed by the Appellant is dismissed.