Interest on amounts deposited during investigation to avoid coercive action, which are not payments of duty, cannot be restricted to the rates under Section 11BB of the Central Excise Act, 1944, and should be paid at 12% from the date of deposit as compensation.

1. The Appellant has filed the present appeal against Order-in-Appeal No.NOI-EXCUS-002-APP-32-2022-23 dated 25.04.2022 passed by the Commissioner (Appeals), CGST & Central Excise, Noida.

2. The facts of the present case in brief are that the Appellant was registered as Central Excise assessee vide registration No.AAACH7447KXM001 and was engaged in the manufacture of various Mentha products which were exported by them. The Appellant used to procure raw material from local market as well as from manufacturers located in the State of Jammu and Kashmir, who were availing benefit of Notification No.56/2002-CE dated 14.11.2002. This notification provided the benefit of refund of duty paid by the manufacturers located in the State of Jammu and Kashmir to such manufacturers but materials supplied by them treated as duty paid goods. The Appellant availed CENVAT Credit of duty paid on raw materials received from manufacturers based in the State of Jammu and Kashmir from other manufacturers and subsequently claimed rebate of such CENVAT credit after export of finished goods. An enquiry was initiated by the officers of the Central Excise Commissionerate, Meerut-II against the Appellant on the ground that he was availing of CENVAT credit only on the basis of invoices issued by the manufacturers based at Jammu and Kashmir State without receipt of any goods from them.

3. During the investigation the Appellant deposited Rs.10,00,000/- to avoid any coercive action by the Department though he did not agree with the allegation of any misuse and misdoing in relation to availment of CENVAT credit. At the end of the investigation, four Show Cause Notices, SCN were issued for recovery of CENVAT credit availed by the Appellant in respect of raw materials said to have been received from the manufacturers based at Jammu and Kashmir State covering different periods from 2003-04 to June, 2009. The Commissioner, Central Excise, Chandigarh was appointed common adjudicator of all above SCNs. However, adjudication of the said cases was not completed even after lapse of 12 years from the date of issue of first SCN. So, the Appellant filed a Writ Petition in the Hon’ble Punjab & Haryana High Court and the Hon’ble Court ordered to quash all the above SCNs vide its judgment dated 22.01.2021.

4. The Appellant, consequent to the judgment of the Hon’ble Court, filed refund claim dated 19.03.2021 for the refund of the amount of Rs.10,00,000/- deposited during the investigation of the case, with the Assistant Commissioner CGST, Badayun who sanctioned the refund claim vide OIO dated 24.11.2021 but interest payable thereon was rejected.

5. The Appellant filed appeal with the Commissioner (Appeals) CGST Noida against the Order dated 24.11.2021 through which interest on the said refund was denied. The Commissioner (Appeals) allowed the appeal vide the impugned Order-in-Appeal and held to pay interest as prescribed under Section 11BB of the Central Excise Act, 1944. The Appellant filed the present appeal against the impugned Order-in-Appeal and claimed that his refund claim is not refund of any duty but is refund of deposit which was kept by the Department illegally without any authority of law for a period more than 12 years. So, he deserves higher rate of interest, not the rate of interest prescribed under Section 11BB of the Central Excise Act, 1944.

6. On behalf the Appellant, Shri Abhinav Kalra, Advocate a