2007 (11) TMI 293 - AT - Central Excise

Tribunal affirms HDPE tapes classification, allows duty refund, dismisses Revenue appeal

The Tribunal upheld the Commissioner (Appeals)'s decision, confirming the correct classification under Chapter 39 for HDPE tapes and fabrics, allowing the ... Interest on delayed refund – held that interest has to be quantified from the date of receipt of refund application and not from the date of fresh application - As such findings of the appellate authorities that the interest is to be granted after three months from date of receipt of filing of refund application, is correct - Revenue’s contention that the period involved was prior to enactment of Section 11BB and as such no interest is payable, is rejected because said provisions are also applicable to the refund application pending on the date of enactment of said Section Issues Involved:1. Correct classification of HDPE tapes and fabrics.2. Refund claim for duty paid under protest.3. Application of unjust enrichment principle.4. Entitlement to interest on delayed refund.Detailed Analysis:1. Correct Classification of HDPE Tapes and Fabrics:The respondent, engaged in manufacturing HDPE tapes, fabrics, and sacks, disputed the classification of HDPE tapes and fabrics. Initially, the authorities classified these goods under Chapter 54, but the respondent contended they should be classified under Chapter 39. The Government of India later issued an order classifying the tapes under subheading 3920.32 and sacks under subheading 3926.90, directing the authorities to demand duty under Chapter 39 and adjust the Modvat credit accordingly.2. Refund Claim for Duty Paid Under Protest:The respondent filed a refund claim on 24-6-1996 for the period from 1-7-1989 to 25-5-1992. This claim went through several rounds of litigation. The Commissioner (Appeals) eventually allowed the refund along with interest, as detailed in Paras 10 and 11 of the Commissioner (Appeals)'s order. The refund was initially filed for Rs. 25,12,218/- and later revised to Rs. 31,67,642/-. The Commissioner (Appeals) concluded that the classification under Chapter 39 was correct, and the respondent was entitled to Modvat credit, which was not allowed earlier due to the incorrect classification under Chapter 54.3. Application of Unjust Enrichment Principle:The principle of unjust enrichment was a significant point of contention. The Commissioner (Appeals) found that the unjust enrichment bar did not apply in this case, as it was a refund of Modvat credit, not a refund of duty paid on intermediate products. The adjudicating authority had not considered this aspect correctly, and the Commissioner (Appeals) emphasized that the refund was due to the reworking of the duty liability under Chapter 39, making the unjust enrichment principle inapplicable.4. Entitlement to Interest on Delayed Refund:The Revenue contested the Commissioner (Appeals)'s decision to grant interest on the refund amount from the date of the initial refund claim. The Tribunal upheld the Commissioner (Appeals)'s decision, stating that interest should be calculated from the date of receipt of the refund application, as per Section 11BB of the Central Excise Act, 1944. The Tribunal noted that the provisions of Section 11BB, enacted w.e.f. 26-5-1995, applied to the refund application filed thereafter, even if the period involved was prior to the enactment. The Tribunal rejected the Revenue's appeal, affirming that the interest was payable from the date of the original refund application and the revised claim.Conclusion:The Tribunal upheld the Commissioner (Appeals)'s order, confirming the correct classification under Chapter 39, entitlement to the refund of Modvat credit, non-applicability of the unjust enrichment principle, and the payment of interest on the delayed refund from the date of the initial application. The Revenue's appeal was dismissed, and the respondent's entitlement to the refund and interest was affirmed.