2016 (11) TMI 428 - AT - Central Excise

High Court orders refund of duty on molasses stored in katcha pits, ruling claims not time-barred.

M/s. Arignar Anna Sugar Mills Versus CCE, Trichy

The High Court quashed the Tribunal's order and directed the Commissioner of Central Excise to grant the refund claims for duty paid on molasses stored in ... Interest on Refund - Commencement of liability of revenue to pay Interest - expiry of three months from the date of receipt of application for refund or on the expiry of the said period from the date on which the order of refund is made - Held that: - reliance placed on the decision of the case of Ranbaxy Laboratories Ltd. Versus Union Of India and Ors. [2011 (10) TMI 16 - Supreme Court of India] where it was held that liability of the revenue to pay interest under Section 11BB of the Act commences from the date of expiry of three months from the date of receipt of application for refund under Section 11B(1) of the Act and not on the expiry of the said period from the date on which order of refund is made - the appellants are entitled for the claim of interest over delayed sanction of the refund - appeal allowed - decided in favor of appellant assessee. Issues Involved:1. Claim for refund of duty paid on molasses stored in katcha pits.2. Validity of the rejection of the refund claim by the Assistant Commissioner.3. Applicability of the period of limitation under Section 11B of the Central Excise Act, 1944.4. Entitlement to interest on the delayed refund under Section 11BB of the Central Excise Act, 1944.Issue-wise Detailed Analysis:1. Claim for Refund of Duty Paid on Molasses Stored in Katcha Pits:The appellant, M/s. Arignar Anna Sugar Mills (AASM), requested permission to store molasses in katcha pits due to the capacity of steel tanks being surpassed. Permission was granted under Rule 173 (4) of the Central Excise Rules, 1944, with the condition that the duty be paid based on the valuation rules. AASM paid the duty under protest and later claimed a refund of Rs. 4,67,259/- and Rs. 19,37,010/- for the years 1995 and 1997-98 respectively, stating that the molasses were sold at a lower price than the value adopted for duty payment.2. Validity of the Rejection of the Refund Claim by the Assistant Commissioner:The Assistant Commissioner rejected the refund claims under Section 4 of the Central Excise Act, 1944, and Rule 49 of the Central Excise Rules, 1944, read with Section 11B of the Central Excise Rules, 1944. The Commissioner (Appeals) upheld these rejections, and the Tribunal also dismissed the appeals filed by AASM. However, the Hon'ble High Court of Madras quashed the Tribunal's order and directed the Commissioner of Central Excise, Trichy, to grant the refund claims.3. Applicability of the Period of Limitation Under Section 11B of the Central Excise Act, 1944:The Department contended that the refund claims were time-barred under Section 11B of the Central Excise Act, 1944. However, the Hon'ble High Court observed that the duty was paid under protest, and as per the second proviso to Section 11B(1), the one-year limitation does not apply in such cases. The court also noted that the Superintendent's letter warning against seeking remission later was not an adjudication of the dispute, and the refund claims should be processed under statutory provisions by a quasi-judicial authority.4. Entitlement to Interest on the Delayed Refund Under Section 11BB of the Central Excise Act, 1944:The appellant argued that they were entitled to interest on the delayed refund. The Commissioner (Appeals) rejected this claim, stating that the refund was sanctioned within three months from the date of the refund application based on the High Court's order. However, the Tribunal noted that the matter had reached the High Court based on an earlier refund claim filed within the prescribed time. Citing the Supreme Court's judgment in M/s Ranbaxy Laboratories Ltd., the Tribunal held that interest under Section 11BB becomes payable if the refund is not made within three months from the date of receipt of the refund application. Thus, the appellant was entitled to interest on the delayed refund.Conclusion:The Tribunal allowed the appeal filed by the appellant, directing the Department to pay interest on the delayed refund as per Section 11BB of the Central Excise Act, 1944. The order was pronounced in open court on 21-04-2016.