Exported goods refund claim granted with interest under CENVAT Rules. Tribunal directs interest calculation.

The appellant filed refund claims for exported goods under a Letter of Undertaking, seeking refund of accumulated Modvat credit under Rule 5 of the CENVAT Credit Rules, 2002. Initially rejected, the Commissioner (Appeals) allowed the refund, which was later determined at Rs. 65,79,35,635/-. The appellant was granted interest on the delayed refund under Section 11BB of the Central Excise Act, 1944, calculated from three months after the refund claim date. The Tribunal directed the authorities to calculate and pay the interest accordingly, setting aside the previous order and allowing the appeal.

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Issues Involved:

1. Eligibility for refund of CENVAT Credit under Rule 5 of the CENVAT Credit Rules, 2002.
2. Entitlement to interest on delayed refund under Section 11BB of the Central Excise Act, 1944.
3. Calculation of interest on the refund amount.

Issue-wise Detailed Analysis:

1. Eligibility for refund of CENVAT Credit under Rule 5 of the CENVAT Credit Rules, 2002:

The appellant had filed two refund claims for the period May 2002 to December 2002 and April 2001 to August 2001, stating that they exported Copper Cathode and Copper Rods without payment of duty under a Letter of Undertaking (LUT). They utilized Copper Anode as raw material, purchased from their sister concern, for manufacturing the final product. The appellant claimed that they could not utilize the credit of duty paid on inputs under erstwhile Rule 57 AU of Central Excise Rules, 1944 (Rule 3 of the CENVAT Credit Rules, 2002) as the finished goods were exported under LUT. Hence, they filed refund claims under Rule 5 of the CENVAT Credit Rules, 2002.

The jurisdictional Assistant Commissioner/Deputy Commissioner issued Show Cause Notices, and the refund claims were initially rejected. However, on appeal, the Commissioner (Appeals) allowed the refund of accumulated Modvat credit. The CESTAT, Mumbai, remanded the matter back to the Commissioner (Appeals) for re-determination of facts regarding the refund of accumulated credit attributed to exported goods under bond alone. After verification, the refund claim was determined to be Rs. 65,79,35,635/-, with Rs. 44,20,58,831/- lying in balance in the CENVAT Credit register.

2. Entitlement to interest on delayed refund under Section 11BB of the Central Excise Act, 1944:

The appellant sought interest on the delayed refund, citing the judgment in Reliance Industries Limited, which held that the refund claim under Rule 5 of the CENVAT Credit Rules, 2004, would be governed under Section 11B of the Central Excise Act, 1944, and interest under Section 11BB would be applicable for delays. The appellant argued that the refund claim was made on 29.09.01 and 31.01.03, and the delay in granting the refund warranted interest.

The Revenue contended that the appellant filed a revised refund claim on 08.11.04, and the refund was sanctioned within the stipulated period. They argued that the appellant utilized the credit during the intermittent period, indicating that the amount could have been utilized without filing the refund claim, thus negating the need for interest.

The Tribunal held that interest is compensation for the deprivation of the use of money, as elucidated in the Central Bank of India case. The Tribunal affirmed that the appellant was entitled to interest on the delayed refund, as the amount was refundable as per law.

3. Calculation of interest on the refund amount:

The Tribunal clarified that interest should be calculated from three months after the date of the refund claim and on the reduced balances whenever an amount was utilized. For instance, if the refund claim was for Rs. 100/- and Rs. 80/- was utilized in the 5th month, interest would be calculated on Rs. 100/- until the utilization of Rs. 80/-, and thereafter on the remaining balance.

The Tribunal directed the lower authorities to calculate and pay the interest accordingly, setting aside the impugned order and allowing the appeal.

Conclusion:

The Tribunal concluded that the appellant was entitled to interest on the delayed refund of CENVAT Credit, calculated as per the directions provided. The impugned order was set aside, and the appeal was allowed.

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