JANUARY 31, 2015

By S B Parikh

AS per the new provisions for filing of appeals, mandatory pre-deposit @7.5% / 10% is required to be made under Section 35F of the Central Excise Act, 1944, as amended w.e.f. 06.08.2014 vide the Finance (No.2) Act, 2014. Further, interest on refund of such pre-deposits (made on or after 06.08.2014) is required to be paid by Department for the period from the date of pre-deposit till the date of refund under Section 35FF. These provisions have also been made applicable to Service Tax vide Section 83 of the Finance Act, 1994 (as amended). As per Para 5.2 of CBEC & Circular No. 984/08/2014-CX dated 16.09.2014, in all cases where the appellate authority has decided the matter in favour of the appellant, refund with interest should be paid within 15 days of the receipt of the letter of appellant seeking refund.

As per the Circular F.No. 15/CESTAT/General/2013-14 dated 28.08.2014 issued by Registrar of CESTAT, New Delhi, mandatory deposit of duty can be made from CENVAT Credit account and the appellant has to produce evidence thereof while filing appeal.

Suppose an assessee has made pre-deposit from CENVATcredit account. After few years, appellate authority passes order in favour of the assessee/appellant. Naturally, Department will not give cash refund, but allow re-credit in CENVAT credit account. In the following situations, at the time of getting refund in CENVAT credit account, the assessee may not be able to utilize it:

++ Closure of business

++ Final product becomes exempted

++ Assessee avails SSI exemption

++ Assessee stops manufacturing of dutiable goods

++ Assessee has accumulated CENVAT credit

In above situations, assessee may claim cash refund of pre-deposit. No clarification is available as to whether refund of pre-deposit made from CENVAT credit account can be given in cash or not.

It is also not clarified whether interest on refund of such pre-deposit (made from CENVAT credit account) has to be given in cash or in CENVAT credit account. On going through the statutory provisions of Section 35F and 35FF, it appears that in all cases of refund of pre-deposit made on or after 06.08.2014, interest has to be paid in cash. There is no provision for payment of interest by Department in CENVAT credit account. So, it is felt that interest is payable in cash even though pre-deposit was made from CENVAT credit account.

In order to avoid litigation, clarification about mode of payment of such refund of pre-deposit and interest may be issued by the CBEC.  

(The views expressed are strictly personal.)