2026-VIL-1631-CESTAT-KOL-CE
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CENTRAL EXCISE CESTAT Cases

Central Excise – Refund of amount deposited during investigation, Interest payable on delayed refund – Investigation was conducted alleging incorrect availment of MODVAT credit. The appellant deposited amount in five instalments during the investigation period before issuance of Show Cause Notice. After initial confirmation of demand, the matter was remanded and after two rounds of litigation, the Tribunal vide Final Order set aside the demand on the ground that the appellant was entitled to MODVAT credit - The refund was granted but without any interest on the ground that the refund was sanctioned within three months of the refund claim – Whether interest is payable on the amount deposited during investigation and at what rate - HELD - Once the Tribunal sets aside the demand, the deposited amount loses the colour of excise duty and becomes a revenue deposit held by the Department in custodial capacity. The Revenue has no legal claim to retain such amount and must refund it with interest - Though Sections 11B and 11BB which govern refund of duty are not applicable to investigation deposits, the principles laid down by the Supreme Court establish the foundational right of an assessee to receive interest at 12% per annum on amounts wrongly retained by the State - The fact that the amount was held for approximately 30 years constitutes unjustified withholding. Multiple High Court decisions establish that interest at 12% per annum is payable on refund of investigation deposits. The denial of interest on the ground that no statutory provision prescribes the rate is not sustainable - The applicability of Section 11BB is excluded as the deposit is not a payment of duty. The appellant is entitled to interest at 12% per annum from the date of each deposit till the date of actual refund – The impugned order is set aside and the appeal is allowed
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