IMPORTANT POINT
The court established that interest on delayed refunds of pre-deposits can be claimed at 12% per annum based on judicial precedents, despite the absence of a specific statutory provision at the time.

JUDGMENT :

1. Heard Sri Sudhir Mehta, learned counsel for the appellant and Sri K. K. Maiti, learned senior standing counsel, assisted by Sri Abhradip Maity, learned junior standing counsel for the respondents.

2. This appeal was admitted by this Court by order dated 14.06.2012, on the following substantial question of law:-

“Whether the Learned Tribunal is justified in law in not allowing the interest at the rate of 12 per cent per annum on the refund amount of pre-deposit?”

Facts

3. Briefly stated, facts of the present case are that on 20th August 1998, a sum of Rs.9,93,200/-was seized by the Director of Revenue Intelligence on the ground that it was liable to confiscation being sale proceeds of the goods which was liable for confiscation. By order dated 30.11.2018, the Adjudicating Authority held that the seized cash is not liable for confiscation but it imposed penalty of Rs.65 lakh upon the appellant and the aforesaid sum of Rs.9,93,200/-was sought to be appropriated against the penalty. The appellant preferred an appeal before the Customs, Excise and Service Tax Appellate Tribunal [for short, ‘CESTAT’], in which, by order dated 22nd April 2000, the Tribunal directed that the aforesaid sum of Rs.9,93,200/-shall be treated as pre-deposit under Section 129E of the Customs Act, 1962. By order dated 17.12.2002, the Tribunal allowed the appeal of the appellant and set aside the order of confiscation and penalty. Thus, a sum of Rs.9,93,200/-held by the respondents as pre-deposit under Section 129E of the Customs Act, 1962 became refundable. Since the amount was not being refunded by the respondents, therefore, the appellant filed a writ petition No.1601 of 2005, which was disposed of by order dated 05.09.2005 directing the respondents to consider the appellant’s claim for refund within three weeks. On 01.12.2005, the Commissioner of Customs directed refund of Rs.9,93,200/-along with applicable rate of interest. On 05.01.2006, the Assistant Commissioner of Customs passed an order for refund of Rs.9,93,200/-and interest @ 6% per annum amounting to Rs.1,74,803/-. Since the interest was granted @ 6% per annum, therefore, the appellant became aggrieved with the order of the Assistant Commissioner. Consequently, he filed an appeal before the Commissioner (Appeal) on 21.02.2006, which was dismissed by the Commissioner (Appeal) by order dated 29.06.2006. Aggrieved, the appellant filed an appeal before the CESTAT on 19.07.2006, which was dismissed by the CESTAT by the impugned order dated 24.01.2012. Aggrieved with the order of the CESTAT, the appellant herein has filed the present appeal on 14.06.2012, which has been admitted on the afore-quoted substantial question of law.

Submissions

4. Learned counsel for the appellant submits that there was no provision under the Act providing for rate of interest on refund of pre-deposit. Earlier, the respondents were not granting refund, but it was pursuant to the judgment of Hon'ble Supreme Court in Commissioner of Central Excise, Hyderabad v. ITC Limited 2005 (179) ELT 15 (SC) that the Central Board of Excise and Customs issued a circular bearing No.802/35/2004-CX dated 08.12.2004 allowing payment of interest on delayed refund of the amount of principal deposit. No rate of interest was provided under the aforesaid circular for delay in refund of pre-deposit beyond the period of three months. In the aforesaid case of ITC Limited (supra), Hon'ble Supreme Court granted interest on refund @ 12%. In similar circumstances, a coordinate Bench of this Court in Madura Coats Private Limited v. Commissioner of Central Excise, Kolkata – IV 2012 (285) ELT 188 (Cal.) has also granted interest @ 12% per annum on delayed refund of pre-deposit. He further submits that the amendment in Section 35FF was introduced with effect from May 10, 2008 by Section 85 of the Finance Act, 2008 (18 of 2008) providing applicability of rate of interest as governed under Section 11BB of the Central Excise Act. Since in the present