Interest rate notified for delayed refund of pre deposit

By Vijay Kumar

BY the Finance Act, 2014, w.e.f 06.08.2014, section 35FF of the CEA, 1944 is substituted to read -

Interest on delayed refund of amount deposited under section 35F.
35FF. Where an amount deposited by the appellant under section 35F is required to be refunded consequent upon the order of the appellate authority, there shall be paid to the appellant interest at such rate, not below five per cent and not exceeding thirty-six per cent per annum as is for the time being fixed by the Central Government, by notification in the Official Gazette, on such amount from the date of payment of amount till, the date of refund of such amount:
Provided that the amount deposited under section 35F, prior to the commencement of the Finance (No. 2) Act, 2014, shall continue to be governed by the provisions of section 35FF as it stood before the commencement of the said Act.

Vide section 83 of FA, 1994 s.35FF is also applicable to Service Tax. Similar substitution has also been made in the Customs Act, 1962 - section 129EE refers.

The notification under this section has been issued the day before yesterday and the rate of interest is fixed at six percent per annum.

On the subject, this is what DDT 2404 /25.07.2014 said -

Interest on refund of Pre deposit from Day One - at rate to be notified: At present if pre deposit is to be refunded due to an appellate order, interest is paid from a date after three months from the receipt of the appellate order. It seems this is to be amended for payment of interest from the date of deposit, but this will apply to only deposits made after the enactment of the Finance Bill. Interest will be at a rate (between 5and 36 percent) to be notified by the Government. But what happens if the operation of the order of the appellate authority is stayed by a superior court or tribunal - no answers!

Considering that the new section 35FF/129EE is applicable only to deposits made u/s 35F/129E after the date of enactment and the notification prescribing interest rate was issued on the 12th August, 2014, what would be the interest rate for the period from 6th August 2014 to 11th August 2014 is another question that begs for an answer.

And, by the way, which year would the interest rate reach thirty-six percent?

Notification , Dated: 12.08.2014