Interest on refundable pre-deposits runs from deposit until refund, regardless of appellant-caused delay.

The appellant challenged a service-tax demand confirmed by the Commissioner’s order dated 30 May 2014.

It made a statutory pre-deposit under Section 35F of the Central Excise Act, 1944, as applicable to service tax through Section 83 of the Finance Act, 1994, on 12 November 2014.

After the appellant’s appeal before the Tribunal was unsuccessful, the High Court allowed its further appeal in CEAC No. 4/2018 by judgment dated 31 October 2018.

The appellant sought refund of the pre-deposit with interest only on 1 April 2024, more than five years after the High Court’s decision.

The department refunded the pre-deposit with interest for 1,449 days—from the date of deposit until the High Court’s judgment—but denied interest for the subsequent period, attributing the delay to the appellant’s failure to promptly inform the department and furnish the judgment.

1. Whether interest under Section 35FF of the Central Excise Act, 1944, on a refundable pre-deposit is payable from the date of deposit until the date of actual refund, irrespective of the appellant’s delay in seeking refund.

2. Whether the appellant’s unexplained delay of more than five years in submitting a refund request disentitled it from claiming interest for that period.

Section 35FF of the Central Excise Act, 1944, as applicable to service tax through Section 83 of the Finance Act, 1994, mandates payment of interest on an amount deposited under Section 35F when the amount becomes refundable consequent upon an appellate order, calculated “from the date of payment of the amount till the date of refund”; the provision does not make the entitlement dependent on the cause of delay or on the assessee’s prompt filing of a refund request.

The Tribunal also considered Board Circular No. 984/08/2014-CX dated 16 September 2014, which states that a separate refund application is unnecessary and that a simple letter with the appellate order should ordinarily result in refund within 15 days.

The Tribunal applied the principle that taxation statutes must be enforced according to their text, and that considerations of equity, fairness, hardship, or whether the assessee benefits from its own delay cannot override an unambiguous statutory mandate.

The High Court’s decision made the pre-deposit refundable, thereby attracting Section 35FF.

The statutory language fixes the commencement of interest at the date of payment of the pre-deposit and its endpoint at the date of refund, without creating an exception for delay caused by the appellant.

Although the appellant’s failure to notify the department for over five years was unexplained and contrary to the efficient-refund procedure contemplated by the Board circular, the circular could not restrict the substantive entitlement granted by Section 35FF.

The Tribunal rejected the Revenue’s reliance on fairness and the principle that a party should not profit from its own wrong, holding that equity has no place in the interpretation or application of the clear statutory provision.

Accordingly, interest was payable for the entire intervening period, including the period attributable to the appellant’s own delay.

The Tribunal held that the appellant was entitled to interest under Section 35FF for the full period from 12 November 2014, the date of pre-deposit, until the date on which the refund was actually paid, including the period of more than five years following the High Court’s judgment.

The impugned order was modified and consequential relief was granted to the appellant.