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Deals & Mandates |
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3 February 2025 |
In a significant ruling, the Customs, Excise & Service Tax Appellate Tribunal (CESTAT), Delhi, has granted a refund along with interest, despite the absence of a statutory provision for interest under central excise laws at the relevant time.
The case involved M.P. Power Transmission Co. Ltd., which was compelled to register and pay central excise duty on its fabrication of transmission towers. Though the excisability issue was ultimately settled in the assessee’s favour, the refund claim was denied as time-barred.
The Tribunal, however, ruled that when tax is not legally payable, the government cannot retain amounts collected under a mistake of law, and limitation would not apply. Citing various High Court decisions, CESTAT allowed the refund along with 12% annual interest from the date of rejection of the refund claim.
The Tribunal relied on the Supreme Court’s decision in Sandvik Asia, affirming that taxpayers must be compensated when their funds are wrongfully withheld for prolonged periods.
The appeal was successfully argued by Ms. Reena Khair, Senior Partner, Kochhar & Co., assisted by Ms. Vrinda Bagaria, Principal Associate, Kochhar & Co.