2018 (5) TMI 1112 - AT - Central Excise

Tribunal rules against interest appropriation on delayed refunds, citing lack of finality for pending demands.

M/s. Lakshminarayana Mining Company Versus Commissioner Of Central Tax And Central Excise, Belgaum

The Tribunal allowed both appeals of the appellant, setting aside the lower authorities' decision to appropriate interest on delayed refunds against ... 100% EOU - appropriation of interest against the disputed demand, which was sub-judice before the High Court - Held that: - this issue is no more res integra and has been settled in favor of the assessee in the case of ABB Ltd. vs. CCE [2016 (6) TMI 441 - CESTAT BANGALORE], where it was held that the appropriation of refund amount towards duty demand pending in other cases which has not attained finality is not legal and proper - appeal allowed - decided in favor of appellant. Issues:Refund claim rejection, Interest on delay in payment of refund, Appropriation of interest against pending arrears, Ignoring stay order by authorities.Refund Claim Rejection:The appellants, a partnership firm and an Export Oriented Unit (EOU) engaged in mining and exporting iron ore fines, filed refund claims under Rule 5 of CENVAT Credit Rules, 2004 for unutilized CENVAT credit of service tax paid on inputs and input services. The first claim for &8377; 66,07,354/- and the second for &8377; 45,65,780/- were partially sanctioned. Appeals were filed against the rejected portions, and the Commissioner (A) set aside the rejection, sanctioning the full refund. Subsequently, refund claims for interest on delay in payment of refund were filed, which were initially rejected but later sanctioned by the Commissioner (A). The lower authorities appropriated the interest against pending arrears of revenue, which were sub-judice and stayed by the High Court. The Commissioner (A) rejected the appeals against this appropriation, leading to the present appeals.Interest on Delay in Payment of Refund:The appellant sought interest on the delayed refund amounts, which were initially rejected by the Asst. Commissioner but later sanctioned by the Commissioner (A). However, the lower authorities appropriated the interest against pending arrears of revenue, despite the stay order by the High Court. The appellant appealed against this appropriation, arguing that the demands had not reached finality and citing various decisions supporting their position. The Tribunal, following the settled law, held that appropriation of refund against pending customs appeals not yet finalized is not legal. Consequently, the impugned order was set aside, and both appeals of the appellant were allowed.Appropriation of Interest Against Pending Arrears:The issue revolved around the lower authorities' decision to appropriate the sanctioned interest on delayed refunds against pending arrears of revenue, which were under stay by the High Court. The appellant contended that such appropriation was not sustainable in law, as the demands had not attained finality. Citing precedents, the Tribunal agreed with the appellant's position and set aside the impugned order, allowing both appeals.Ignoring Stay Order by Authorities:The appellant argued that the impugned order was unsustainable as it disregarded the stay order issued by the High Court, which stayed the recovery related to the disputed demand sub-judice before the court. Despite the stay order, the lower authorities appropriated the interest against the disputed demand. The Tribunal, in line with established legal principles and previous decisions, found the impugned order unsustainable and set it aside, ruling in favor of the appellant.In conclusion, the Tribunal allowed both appeals of the appellant, holding that the appropriation of the interest against pending arrears of revenue, ignoring the stay order by the High Court, was not legally sustainable. The decision was based on settled law and precedents, emphasizing that appropriation of refunds against demands not yet finalized is impermissible.