2011 (8) TMI 354 - AT - Central Excise

Commissioner Appeals overturns demand, grants interest under Section 11BB. Precedent: Kirloskar Ferrous Industries Ltd.

The Commissioner (Appeals) allowed the appeal, stating the demand did not exist. The Tribunal held the appropriation of the amount was wrong, and the ... Interest under Section 11BB - Wrong appropriation of refund/rebate while stay application was pending - CBE&C instruction against coercive recovery within sixty days of communication of order - Entitlement to interest where sanctioned refund is withheldInterest under Section 11BB - Wrong appropriation of refund/rebate while stay application was pending - Entitlement to interest where sanctioned refund is withheld - Whether appellants are entitled to interest on the amount appropriated from their sanctioned rebate where the appropriation was made while their stay application and appeal were pending, and if so, the date from which interest is payable. - HELD THAT: - The Tribunal found that the original appropriation of the amount from the sanctioned rebate was wrongful because the appellants had filed a stay application and appeal before the appropriation was made. The Board's circular dated 25.05.04 directs that coercive recovery should not be undertaken within sixty days of communication of the order and that adjudicating authorities should ascertain whether a stay application has been filed before appropriating amounts from sanctioned refunds. Consequently, the appropriation was contrary to the Board's instructions and should not have been made. Where a refund claim has been sanctioned but payment is withheld through such wrongful appropriation, Section 11BB applies and interest becomes payable as the amount effectively remained with the Revenue despite being payable to the assessee. The Tribunal applied the reasoning in Kirloskar Ferrous Industries Ltd. that delay beyond the statutory period attracts interest, and distinguished Birla Copper on its facts (where stay had lapsed by operation of law). Therefore, interest is admissible on the withheld amount, and the appropriate date for computing interest is the date on which the rebate/refund claim was filed (the date when payment ought to have been made), not the later date three months after the appellate order. [Paras 3, 4]Appellants are entitled to interest under Section 11BB on the amount wrongly appropriated; interest is to be computed from the date the rebate/refund claim was filed.Final Conclusion: The appeal is allowed on the ground that the appropriation of the sanctioned rebate while the stay application was pending was wrongful; interest under Section 11BB is payable on the withheld amount from the date of filing the rebate/refund claim. Issues:1. Appropriation of amount from rebate claim2. Eligibility for interest on withheld amountIssue 1: Appropriation of amount from rebate claimThe case involved the appellant, engaged in manufacturing pharmaceutical products, filing two rebate claims for duty paid on exported goods. The Assistant Commissioner sanctioned the claims but reduced the payable amount by Rs.9,04,894, citing a demand due to the Revenue. The Commissioner (Appeals) later allowed the appeal against this decision, stating that the demand did not exist. The appellant sought payment of the withheld amount, which was granted without interest. The appellant contended that interest should be paid from the date of filing the refund claim. The Tribunal emphasized that coercive measures for recovery should not be taken within sixty days of the order, as per the Circular dated 25.05.04. The Tribunal held that the appropriation of the amount was wrong and that the appellants were eligible for interest as per Section 11BB of the Central Excise Act.Issue 2: Eligibility for interest on withheld amountThe authorized representative argued that interest should be paid from the date of filing the refund claim, relying on precedents like the case of Kirloskar Ferrous Industries Ltd. The Tribunal agreed, stating that interest becomes admissible if a refund is delayed beyond three months. The Tribunal distinguished another case, Birla Copper, where the stay had not been extended, leading to appropriation after 180 days. In the present case, the stay application was pending when the appropriation was made, making the appellants eligible for interest. The Tribunal ruled that the appellants were entitled to interest on the withheld amount from the date of filing the rebate claim.