CESTAT Delhi Grants Interest on Refund from Date of Deposit

ALO Law Office- IDT Tax I Arbitration I Litigation

Date: 12.01.2026

CESTAT Delhi Grants Interest on Refund from Date of Deposit

The Customs, Excise & Service Tax Appellate Tribunal (CESTAT), New Delhi, recently delivered a significant judgment in the case of M/s. Veera Fragrances Pvt. ​ Ltd. vs. Principal Commissioner of Customs, New Delhi – ACC Import. ​ This decision, pronounced on January 7, 2026, has set a precedent for refund claims involving pre-deposited amounts during investigations. The case revolved around the refund of Rs. 98,81,642/- deposited by the appellant during an investigation, and the entitlement to interest on the refunded amount. ​

Background of the Case

M/s. Veera Fragrances Pvt. ​ Ltd., a manufacturer of aromatic compounds, imported aromatic chemicals for perfumery preparation from Givaudhan, Switzerland. ​ During an investigation by the Directorate of Revenue Intelligence (DRI), Lucknow, the company deposited Rs. ​ 98,81,642/- between August 28, 2017, and September 18, 2017, without prejudice to its rights. ​ Subsequently, a Show Cause Notice (SCN) was issued on February 1, 2018, demanding customs duty of the same amount. ​

The Principal Commissioner of Customs confirmed the demand along with penalties and interest through an Order-in-Original dated December 3, 2019. ​ However, the Tribunal set aside this order on July 5, 2023, in Customs Appeal No. ​ 50643/2020, ruling in favor of the appellant. ​

Refund Claim and Appeal

Following the Tribunal’s decision, M/s. Veera Fragrances Pvt. ​ Ltd. filed a refund claim on March 21, 2018, seeking the return of the deposited amount along with interest from the date of deposit. ​ The Assistant Commissioner (Refund) sanctioned the refund on August 1, 2024, but denied interest. ​ The appellant challenged this decision, and the Commissioner (Appeals) granted interest but only from three months after the receipt of a second refund application filed on October 27, 2023, following the Tribunal’s order. ​

Still aggrieved, the appellant filed the present appeal, arguing that interest should be granted from the date of deposit, as the amount was paid during the investigation and was effectively a pre-deposit. ​

Key Arguments and Observations

The appellant contended that the deposit made during the investigation was akin to a pre-deposit under Section 35F of the Central Excise Act, 1944, and Section 129EE of the Customs Act, 1962. ​ They cited the case of Principal Commissioner of CGST, New Delhi vs. Emmar MGF Construction Pvt. ​ Ltd. (2021), where it was held that interest is payable on pre-deposited amounts from the date of deposit until the refund is disbursed. ​

The Tribunal observed that the refund claim filed on October 27, 2023, was a continuation of the original claim filed on March 21, 2018, and should not be treated as a new application. ​ It further noted that the Central Government’s Circular No. ​ 984/8/2014-CX dated September 16, 2014, explicitly provides for interest on pre-deposited amounts from the date of deposit to the date of refund. ​

Final Decision

The Tribunal ruled in favor of M/s. ​ Veera Fragrances Pvt. ​ Ltd., holding that the deposited amount was effectively a pre-deposit and that the appellant was entitled to interest from the date of deposit until the refund was disbursed. ​ The interest rate was fixed at 6%, as prescribed by the Central Government. ​ The Tribunal set aside the order of the Commissioner (Appeals) and allowed the appeal. ​

Implications of the Judgment

This landmark decision reinforces the principle that amounts deposited during investigations are to be treated as pre-deposits, and interest must be paid from the date of deposit if the assessee succeeds in their appeal. ​ It ensures that taxpayers are not unfairly deprived of their rightful dues and prevents unjust enrichment by the revenue authorities. ​

The judgment also clarifies the application of Section 129EE of the Customs Act, 1962, and Section 35FF of the Central Excise Act, 1944, emphasizing the importance of timely refunds with interest to maintain fairness in tax administration. ​

Conclusion

The CESTAT’s decision in the M/s. Veera Fragrances Pvt. ​ Ltd. case is a significant step in upholding the rights of taxpayers and ensuring accountability in the refund process. It serves as a reminder to authorities to adhere to the provisions of the law and provides clarity on the treatment of pre-deposited amounts during investigations. This judgment will undoubtedly have a far-reaching impact on similar cases in the future, setting a benchmark for fair and transparent tax practices.

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Source: CESTAT Delhi

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