GST Update No 270 on interest on refund allowed for amount deposited during investigation

The discussion as regards to payment of interest on refund granted during the course of investigation has laid its roots from the erstwhile GST regime. On several occasions the departmental officers visit the premises of the taxpayers, carry on investigations and compel the assessee to deposit the alleged amount demanded. Subsequently, in various cases, the consideration is refunded to the taxpayer because the order attains finality. However, the moot question which pre-occupied the minds of taxpayers is whether the interest shall also be paid along with the amount refunded and if yes, at what rate and for which time period. There had been catena of cases on the subject matter under consideration. On parallel lines, one case came in front of New Delhi CESTAT in the case of M/S BBM IMPEX PVT. LIMITED. The decision imparted in this case is subject matter of discussion of our present update. The appellant has imported certain goods wherein dispute arose as regards to the value of goods. The appellant deposited the differential amount for the purpose of provisional release of goods amounting to Rs. 13,50,000/-. Thereafter, show cause notice was issued as on 04.02.2016 and order in original was passed wherein the proposed duty was confirmed along with penalty and fine. The appeal was allowed and demand and penalty were set aside. Hence, refund claim of amount deposited was filed as on 20.07.2020 along with interest. The adjudicating authority rejected the refund claim. The matter was preferred further wherein it was imparted that the refund shall be granted along in accordance with provisions of Section 27A of Customs Act from the end of 3 months from date of application of refund. Thereafter, the appellant filed refund claim on 20.07.2020 claiming for the refund of the amount deposited of Rs. 13,50,000/- on 22.09.2015 along with appropriate interest. However, the adjudicating authority rejected the interest and granted refund only for the principal amount of Rs. 13,50,000/-. Thereafter, appellant preferred appeal before the Commissioner (Appeals), who was pleased to hold that the appellant is entitled to interest under section 27A of the Customs Act. It was further observed that as per Section 27A, interest is payable from the end of three months, from the date of application of refund and accordingly, allowed interest on refund for the period 12.01.2021 to 04.03.2021 only, on the amount of Rs.12,85,013/-, observing that in view of the appropriation in the order-in-original, the appellant is not entitled to interest on the amount adjusted towards fine. Being aggrieved, the appellant is before the Tribunal. The appellant submitted that the issue under consideration is not res integra and therefore interest is payable as per Section 129EE of the Customs Act. Therefore, the amount of pre-deposit should be refunded along with interest under Section 129EE of the Customs Act. Reliance in this regard was placed on recent decision in the case of Indo Rubber and Plastic Works wherein it was held that the deposit made during investigation becomes pre-deposit ifso facto and accordingly entitled to interest as per law from the date of deposit till the date of refund. Reference was also drawn to decision of Apex Court in the case of Reeba Textiles Ltd.- 2022 (Vol.3) TMI 693 and Sandvik Asia Ltd.- 2007 (8) STR 193 (SC). The Counsel of revenue placed reliance on decision of same Tribunal in the case of Jovex International wherein the case was travelled to Delhi High Court and stay has been granted for the order of the Tribunal. The Court after analysing the provisions and the precedent decisions held that the appellant is entitled to grant of interest as per Section 129EE of the Customs Act from the date of deposit till date of refund at the rate of 12%p.a. The decision was delivered in line with the decision of Apex Court in the case of Sandvik Asia Ltd. stated above. The above decision proved to be welcoming decision by the business community. Although the subject matter under discussion is well acknowledged in various Judicial Rulings and is settled in favour of the assessee,reference may be made to the decision given by the CESTAT in the case of Ghaziabad Ship Breakers Pvt. Ltd. V/s Commissioner of Customs and in the case of Marshall Foundry & Engg. (P) Ltd. V/s CGST. It is high time that these settled judgments should be recognised by the departmental officers so that unnecessary can be avoided.

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GST Update No 270 on interest on refund allowed for amount deposited during investigation

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