2026-VIL-1457-CESTAT-ALH-CE
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CENTRAL EXCISE CESTAT Cases

Central Excise – Majority Order - Revenue Deposit - Interest on Delayed Refund - Appellant officers conducted a search regarding fraudulent Cenvat Credit availment. Respondent deposited amounts during investigation as persuaded by the department. Later the enquiry was transferred to the central investigating agency which issued a demand cum show cause notice proposing recovery of Cenvat Credit. During pendency of the notice, respondent applied for refund of the deposited amount. The refund application was rejected by the adjudicating authority but the first appellate authority allowed the refund along with interest from the date of deposit. Revenue preferred appeals contending that no statutory provision authorized payment of interest on such deposits and that provisions of Section 11B and 11BB of the Central Excise Act were not applicable to deposits made during investigation - Whether interest is payable on refund of amounts deposited during investigation when provisions of Section 11B and Section 11BB of the Central Excise Act do not apply to such deposits – HELD - The amounts deposited during the pendency of investigation and proceedings, if not adjudged as duty, fine or penalty, are to be treated as revenue deposits and not as duty. Unspent balance lying in Personal Ledger Account is an advance towards duty and takes colour of duty only when utilized for payment of duty. Hence the limitation provisions of Section 11B of the Central Excise Act are not applicable for refund of such unspent amounts in Personal Ledger Account. Further, as Section 11BB itself provides that it applies only to refunds granted under Section 11B, the provisions of Section 11BB are not applicable when Section 11B does not apply. However, on general principles of equity and commercial law, assessee ought to be compensated, and on general commercial principles, interest on refund is automatic and has to be granted in absence of any statutory provision. Applying the principles laid down by the Supreme Court in Sandvik Asia Ltd. case that an assessee is entitled to compensation when Government wrongfully withholds the assessee's funds, interest on such revenue deposits is automatically payable from the date of deposit. The Tribunal in various decisions has held that interest on such deposits is payable at the rate of 12 percent per annum from the date of deposit till the date of actual realization – The revenue appeals are dismissed by Majority Order
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