CESTAT Delhi Grants 12% Interest on Delayed Refund of Pre-Deposit

Aadrikaa Legal Services (ALS)- Law I Litigation I Arbitration

Date: 28.07.2026

CESTAT Delhi Grants 12% Interest on Delayed Refund of Pre-Deposit

A recent decision by the Customs, Excise & Service Tax Appellate Tribunal (CESTAT), Delhi, has provided significant clarity on the entitlement and rate of interest for delayed refunds of pre-deposit amounts in customs duty cases. The case, involving M/s Savi Vision Pvt Ltd., addresses the long-standing issue of compensation for delayed refunds and sets a precedent for similar disputes.

Case Background

• Appellant: M/s Savi Vision Pvt Ltd., represented by Director Sanjeev Ratra
• Respondent: Commissioner of Customs (Preventive), New Delhi
• Core Issue: The appellant sought interest at 12% per annum on a refund amount, from the date of deposit until disbursement, after a protracted legal process.

Timeline of Events

1. Initial Allegation & Penalty:
   • The appellant was accused of aiding in evasion of Contravening Duty (CVD) by under-declaring the retail selling price at import.
   • A penalty of Rs. 25 lakhs was imposed.
2. Appeals & Pre-Deposit:
   • The appellant challenged the order, making a pre-deposit of Rs. 5 lakhs as directed by the Tribunal and the Delhi High Court.
3. Remand & Reduced Penalty:
   • In 2015, the Tribunal set aside the original order, remanded the case for recomputation, and reduced the penalty to Rs. 50,000.
4. Delayed Compliance:
   • Despite repeated requests from 2015 to 2023, the department delayed compliance with the Tribunal’s order.
5. Refund Application & Interest Dispute:
   • The refund was finally sanctioned in 2024, but interest was granted only at 6% per annum, leading to the present appeal for 12% interest.

Legal Arguments & Tribunal’s Analysis

Appellant’s Stand

• Cited previous Tribunal decisions (notably, Kumavat Contractors vs. Commissioner of CGST & ST, Jaipur I) supporting 12% interest on delayed refunds.
• Argued that the refund was a pre-deposit, not a duty, and thus entitled to higher interest.

Department’s Stand

• Claimed that 6% interest, as per Section 35F of the Central Excise Act, 1944, was appropriate and already granted.

Tribunal’s Findings

• Precedent & Statutory Interpretation:
  • The Tribunal examined Section 35F and 35FF of the Central Excise Act, both pre- and post-amendment, and relevant case law.
  • It noted that for pre-deposits, the law and judicial precedents (including Supreme Court and High Court rulings) support interest at 12% per annum for delayed refunds.
• Key Judicial References:
  • Sandvik Asia Ltd. vs. CIT, Pune: Established the principle of compensation for delayed refunds.
  • Sony Pictures Networks India Pvt. Ltd. and Ghaziabad Ship Breakers Pvt. Ltd.: Affirmed 12% interest on delayed pre-deposit refunds.
  • Commissioner of Customs (Import), Raigad vs. Finacord Chemicals (P) Ltd.: Clarified that unjust enrichment does not apply to pre-deposit refunds.
• Final Decision:
  • The Tribunal modified the impugned order, allowing the appeal and granting interest at 12% per annum from the date of deposit until realization.

Implications of the Ruling

1. For Importers & Assessees:
   • Sets a clear precedent for claiming higher interest (12%) on delayed refunds of pre-deposits in customs and excise matters.
   • Reinforces the principle that government departments must compensate for undue delays in refunding amounts held during litigation.
2. For the Department:
   • Emphasizes the need for timely compliance with appellate orders to avoid additional financial liability.
   • Clarifies that pre-deposit refunds are distinct from duty refunds and not subject to unjust enrichment provisions.

Conclusion

The CESTAT Delhi’s decision in the case of M/s Savi Vision Pvt Ltd. is a significant development in customs jurisprudence. It upholds the rights of assessees to fair compensation for delayed refunds and provides a robust legal basis for future claims involving pre-deposit interest.

This ruling is expected to influence similar cases and encourage prompt action by revenue authorities in processing refunds.

Source: CESTAT Delhi

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