2026-VIL-1771-CESTAT-DEL-CE
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CENTRAL EXCISE CESTAT Cases

Central Excise - Claim of Interest at 12% per annum on Refund of Amount Deposited during Investigation as Compensation - Appellant deposited amounts during investigation and before the first show cause notice, the demand was confirmed and the deposits appropriated, and the Tribunal later set aside the order of the Commissioner - Refund was sanctioned without interest, and Appellant claimed interest at 12% from the date of payment, relying on decisions following Sandvik Asia Ltd. v. Commissioner of Income Tax - Whether interest can be granted at 12% per annum as compensation on the amount wrongly withheld - HELD - The decisions relied upon by the Appellant followed Sandvik Asia, which was referred to a larger bench in Commissioner of Income Tax, Gujarat v. Gujarat Fluoro Chemicals. The larger bench clarified that Sandvik Asia was passed on the peculiar facts of that case and that an assessee can claim only the interest provided under the statute. Those decisions did not have the benefit of Gujarat Fluoro Chemicals. The Act prescribes the rate and period of interest in sections 11AA, 11BB and 35FF, and the rate is notified by the Central Government within the range by delegated legislation. Courts and Tribunals cannot fix the rate, and interest can be paid only at the rate and from the date as per the law and not on a view of fairness or equity - The claim of interest at 12% is rejected, and interest can be granted only under the statutory provision applicable - Nature of Amount Deposited during Investigation and Interest under Section 11BB or Section 35FF of Central Excise Act, 1944 on its Refund - Appellant deposited amounts through cheques and a debit entry in the CENVAT account at the behest of investigating officers before any assessment, the amounts were credited to the excise duty head of account, and they were appropriated in the adjudication order which was set aside by the Tribunal - Revenue contended that the refund was one of duty under Section 11B, accepted by the Appellant, so that interest under Section 11BB was not payable since the refund was sanctioned within three months of the application - Whether the amount deposited during investigation is duty, and whether interest is payable under Section 11BB or Section 35FF - HELD - For an amount to be tax or duty, it must be deposited under that head, paid against an assessment or modification of an assessment, and be due at that time. At the time of deposit there was neither assessed duty nor a confirmed demand, so the amount was only a deposit akin to the balance in the erstwhile Personal Ledger Account or the electronic cash ledger under GST. The Act empowers no officer to compel an assessee to pay any amount in anticipation of liability that may arise after investigation, and the assessee can seek refund immediately without proving duress. The amount was not due even after the adjudication order since the Appellant had filed an appeal, and the Commissioner should not have appropriated it. The Appellant did not apply under Section 11B, and even if it had, the nature of the amount would not change. Where the amount deposited during investigation exceeds the mandatory pre-deposit and has not been refunded, the entire amount is to be treated as pre-deposit. The Tribunal admitted the appeal treating the entire amount as pre-deposit, so Section 35FF applies - The amount deposited during investigation is treated as deposit under Section 35F, interest is payable under Section 35FF at the applicable rate from the date of deposit till the date of refund, and the appeal is partly allowed
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