ALO Law Office- IDT Tax I Arbitration I Litigation
Date: 21.11.2025
CESTAT Ahmedabad Grants 12% Interest on Revenue Deposit
This Article has been written by Shri Ravi Shekhar Jha, Advocate based in New Delhi. The views expressed are based on his interpretation of the law. He can be reached at his email id intelconsul@gmail.com or on his Mobile +91-9999005379.
The Customs, Excise & Service Tax Appellate Tribunal (CESTAT) West Zonal Bench at Ahmedabad recently delivered a significant judgment in the case of KLJ Plasticizers Ltd. vs. Commissioner of Customs, Kandla. This case revolved around the appellant’s claim for interest on a refund of Rs. 5 crore, which was deposited during an investigation into alleged duty evasion. The judgment, delivered by Hon’ble, Member (Judicial), has set a precedent for granting interest on revenue deposits, even in the absence of explicit statutory provisions.
Background of the Case
The appellant, KLJ Plasticizers Ltd., had deposited Rs. 5 crore on September 18, 2014, during an investigation into duty evasion. The investigation was based on the premise that the actual consumption of certain inputs was less than the Standard Input Output Norms (SION). After a series of legal proceedings, the CESTAT ruled in favor of the appellant on March 25, 2019, stating that the revenue could not demand duty based on actual consumption being less than SION norms if the export obligations were fulfilled.
Following this favorable ruling, KLJ Plasticizers Ltd. filed a refund claim for the deposited amount, which was sanctioned by the adjudicating authority on November 8, 2019. However, the appellant later filed an application on January 21, 2020, seeking interest on the refunded amount for the period between the deposit date and the refund date. This claim was rejected by the adjudicating authority and subsequently by the Commissioner (Appeals), leading the appellant to approach the CESTAT.
Key Issues in the Case
The case raised two critical legal questions:
- Jurisdiction of the Single Member Bench: Could a Single Member Bench decide the matter, given the potential for the refund amount to exceed Rs. 50 lakh?
- Entitlement to Interest on Revenue Deposits: Was the appellant entitled to interest on the refunded deposit, even though the Customs Act, 1962, does not explicitly provide for such interest?
CESTAT’s Observations and Ruling
Jurisdiction of Single Member Bench
The Tribunal clarified that disputes regarding interest do not fall under the excluded categories mentioned in Section 129C(4) of the Customs Act, 1962. Since interest is neither duty, fine, nor penalty, the Single Member Bench has jurisdiction to decide the matter. The Tribunal cited precedents, including Dhampur Sugar Mills Ltd. vs. Commissioner of Central Excise, Meerut, to support this interpretation.
Entitlement to Interest
The Tribunal acknowledged that the Customs Act, 1962, does not explicitly prescribe interest on revenue deposits. However, it emphasized the principle of compensation for the deprivation of the use of money wrongfully retained by the Revenue. The Tribunal relied on landmark judgments, including Sandvik Asia Ltd. vs. Commissioner of Income Tax and Parle Agro Pvt. Ltd. vs. Commissioner, CGST, which established the doctrine of compensation for unjust retention of funds.
The Tribunal also noted that various High Courts and CESTAT benches have consistently granted interest at 12% per annum on revenue deposits in similar cases. It held that the appellant was entitled to interest at 12% per annum on the refunded amount from the date of deposit (September 18, 2014) to the date of refund (November 8, 2019).
Implications of the Judgment
This decision is a landmark in the realm of indirect tax law, as it reinforces the principle that taxpayers are entitled to compensation for the wrongful retention of their funds by the Revenue. It also clarifies the jurisdiction of Single Member Benches in cases involving interest disputes, ensuring that such matters can be resolved efficiently.
The judgment sets a precedent for future cases involving claims for interest on revenue deposits, providing clarity and consistency in the application of the law. It also underscores the importance of judicial discipline, as the Tribunal followed established precedents from the Supreme Court and High Courts.
Conclusion
The CESTAT’s decision in the KLJ Plasticizers Ltd. case is a significant step toward ensuring fairness and justice in tax-related disputes. By granting interest on revenue deposits at 12% per annum, the Tribunal has upheld the principle of compensating taxpayers for the deprivation of their funds. This judgment serves as a reminder of the importance of adhering to judicial precedents and the doctrine of equity in cases where statutory provisions may be silent.
This case is a testament to the evolving jurisprudence in indirect tax laws and highlights the role of judicial bodies in safeguarding taxpayer rights. It is a must-read for legal professionals, businesses, and anyone interested in understanding the nuances of tax law in India.
Source: CESTAT Ahmedabad
Handy Download:
Write to us at office@aadrikaalaw.com
Tel: +91-11-4999 2707 I +91-9999005379