2022 (4) TMI 728 - AT - Central Excise

Tribunal dismisses appeal on interest denial for refund claim under Central Excise Act

The Tribunal dismissed the appeal filed by M/s Indian Gelatin Chemicals regarding the denial of interest on a refund claim, citing that interest under ... Denial of interest on the refund claim sanctioned to the appellant - finalization of provisional assessment or not - rejection on the ground that the refund claim was allowed under Rule 9B of the erstwhile rule and not under section 11 B of the act and therefore there was no case for interest on the delayed refund since Rule 9 B of the erstwhile rule contained no such provisions for interest - HELD THAT:- The refund has been sanctioned on finalization of provisional assessment. The order granting refund sanctions refund under section 11B of the Central Excise Act, 1944 read with Rule 9B of Central Excise Rules, 1944. The appellant claims that since while sanctioning the refund Section 11B has been invoked, therefore in terms of Section 11 BB the appellant is entitled to interest for the delay in sanction of refund claim from the date of filing of refund claim. The facts of instant case are that while assessment was done provisionally on the direction of Hon’ble High Court, no order finalizing the provisional assessment has been passed. The appellant had filed the refund claim on 29.07.1998 after the Commissioner (Appeals) decided their appeal on 06.01.1998 and held that the goods are rightly classifiable under heading No. 2302 and charge to nil rate of duty - it is seen that in ordinary course of refund arising out of finalization of provisional assessment would be decided in terms of Rule 9B however if any refund arises on account of challenge to an order passed under Sub Rule (5 )of Rule 9 B then such demand or refund would be governed by section 11 A or Section 11 B as the case may be. In the instant case there is no finalization of Provisional assessment and there is no challenge to any such assessment, in these circumstances the refund would not be governed by provisions of Rule 9 B. Relying on the CBEC Circular No 670/61/2002-CX/1 dated 01.10.2002. Another SCN was issued wherein it was held that the refund arising on account of finalization of provisional assessment under Rule 9 B are not governed by the provisions of section 11B. It is seen that this view is in harmony with the observation of Hon’ble Apex Court in the case of MAFATLAL INDUSTRIES LTD. VERSUS UNION OF INDIA [1996 (12) TMI 50 - SUPREME COURT].In this regard the observation of the jurisdictional High Court in the case of CONTEMPORARY PACKAGING TECHNOLOGIES PVT. LTD. VERSUS UNION OF INDIA & 2 [2013 (8) TMI 577 - GUJARAT HIGH COURT] also becomes relevant wherein it is categorically observed that the provisions of Section 11B of the Central Excise Act would not govern the grant of refund claims arising on account of finalization of provisional assessment under rule 9B of Central Excise, 1944. The appeal is dismissed. Issues Involved:1. Entitlement to interest on delayed refund.2. Applicability of Section 11BB of the Central Excise Act, 1944.3. Finalization of provisional assessment under Rule 9B of Central Excise Rules, 1944.4. Examination of unjust enrichment and limitation.Issue-wise Detailed Analysis:1. Entitlement to Interest on Delayed Refund:The appellant, M/s Indian Gelatin Chemicals, filed an appeal against the denial of interest on the refund claim sanctioned to them. They argued that since the refund was sanctioned under Section 11B of the Central Excise Act, 1944, they were entitled to interest for the delay in sanctioning the refund claim from the date of filing the claim. The appellant cited several judgments to support their claim, including the decision of the Hon’ble Apex Court in the case of Ranbaxy Laboratories Ltd, which emphasized that interest under Section 11BB becomes payable if the duty is not refunded within three months from the date of receipt of the application.2. Applicability of Section 11BB of the Central Excise Act, 1944:The revenue argued that the refund was sanctioned under Rule 9B of the Central Excise Rules, 1944, and therefore, the provisions of Section 11BB were not applicable. They relied on the decision of Excel Rubber Ltd and other cases to support their argument. The Tribunal noted that the refund was sanctioned on finalization of provisional assessment and that the order granting refund invoked Section 11B read with Rule 9B. The Tribunal observed that Section 11BB of the Act comes into play only after an order for refund has been made under Section 11B. The Tribunal referred to the Hon’ble Apex Court’s observation in the Ranbaxy Laboratories Ltd case, which clarified that interest under Section 11BB becomes payable on the expiry of three months from the date of receipt of the application for refund.3. Finalization of Provisional Assessment under Rule 9B of Central Excise Rules, 1944:The Tribunal noted that the refund was sanctioned on the finalization of provisional assessment. However, no order finalizing the provisional assessment was passed in the instant case. The Tribunal referred to the Hon’ble Apex Court’s decision in Mafatlal Industries Ltd, which stated that any recoveries or refunds consequent upon the adjustment under sub-rule (5) of Rule 9B would not be governed by Section 11A or Section 11B. However, if the final orders passed under Rule 9B(5) are appealed against, any refund claim arising as a consequence of the decision in such appeal would be governed by Section 11B. The Tribunal concluded that since there was no finalization of provisional assessment and no challenge to any such assessment, the refund would not be governed by the provisions of Rule 9B.4. Examination of Unjust Enrichment and Limitation:The appellant argued that the lower authorities examined the refund in terms of Section 11B, including unjust enrichment and limitation. The Tribunal noted that the Commissioner (Appeals) stated that the test for unjust enrichment was conducted as per the Tribunal’s direction. The Tribunal observed that the proceedings arising out of the filing of the refund claim culminated with presumed finalization of provisional assessment as concluded in the Deputy Commissioner’s order while granting part of the refund claim. The Tribunal found that the view that refunds arising from finalization of provisional assessment under Rule 9B are not governed by Section 11B was in harmony with the Hon’ble Apex Court’s observation in Mafatlal Industries Ltd and the jurisdictional High Court’s decision in Contemporary Packaging Technologies P Ltd.Conclusion:In light of the observations of the Hon’ble Apex Court and the jurisdictional High Court, the Tribunal found no merit in the appeal and dismissed it. The Tribunal pronounced the decision in the open court on 13.04.2022.