2023 (2) TMI 892 - AT - Central Excise

Appellant denied interest on delayed refund of Cenvat credit. Statutory provisions and precedents not in favor.

The Tribunal held that the appellant was not entitled to interest on the delayed refund of unutilized Cenvat credit. Despite the refund being granted ... Rejection of claim for interest on delayed refund under Section 11BB of the Central Excise Act, 1944 - HELD THAT:- The issue needs to be examined in the light of the decision of the Larger Bench of the Bombay High Court in the case of M/S. GAURI PLASTICULTURE P. LTD., BOMBAY DYEING & MANUFACTURING CO. LTD., M/S. SIMPLEX MILLS CO. LTD. VERSUS THE COMMISSIONER OF CENTRAL EXCISE, INDORE, THE COMMISSIONER OF CENTRAL EXCISE, MUMBAI IV, THE UNION OF INDIA THROUGH THE COMMISSIONER OF CENTRAL EXCISE MUMBAI I [2019 (6) TMI 820 - BOMBAY HIGH COURT]. The Hon'ble High Court considered all the earlier judgments taking contrary views, also the orders passed by the Apex Court keeping the question of law open and referring to the provisions of Rule 5 and 11 of the Cenvat Credit Rules, 2004, negatived the contention of the assessee that cenvat credit can be refunded even in relation to those inputs which have not been used in the manufacture of the final product or the exported goods. The appellant herein being unsuccessful in claiming the refund of unutilised Cenvat Credit, approached the Honorable High Court of Rajasthan. The Learned Division Bench after referring to the judgments of various High Courts and also the orders passed by the Apex Court concluded that the Tribunal by the impugned order cannot distinguish the judgments of the High Courts and therefore answered the issue in favour of the assessee. Though the revenue challenged the said order before the Apex Court, however the same stood dismissed on account of low monetary limits. As a result, the application made by the appellant for refund was allowed. If the claim for refund itself was not maintainable in law, the question of grant of interest does not arise. The relief of refund was allowed in favour of the appellant in terms of the order of the High Court of Rajasthan, however the same was silent on the issue of interest as no relief was claimed in that regard by the appellant. Therefore, no relief of interest on delayed refund can be allowed to the appellant at this stage. The appellant is not entitle to interest on delayed refund, the issue of limitation as decided by the Adjudicating Authority is not required to be gone into - Appeal dismissed. Issues Involved:1. Entitlement to interest on delayed refund under Section 11BB of the Central Excise Act, 1944.2. Applicability of judicial discipline and precedent.3. Interpretation of Rule 5 of the Cenvat Credit Rules, 2004.4. Authority of the Tribunal to grant interest.5. Limitation period for claiming interest.Comprehensive Issue-wise Analysis:1. Entitlement to Interest on Delayed Refund under Section 11BB of the Central Excise Act, 1944:The appellant argued that interest on the delayed refund under Section 11BB should be granted automatically by the department without requiring a separate application. The department contended that there is no statutory provision for paying interest on accumulated Cenvat credit not withheld by the revenue. The Tribunal referred to Section 11BB, which mandates interest on refunds delayed beyond three months from the application date. However, it concluded that the appellant was not entitled to such interest because the refund of unutilized Cenvat credit itself was not permissible under the statute, as established by the Bombay High Court in Gauri Plasticulture P. Ltd., 2019 (30) GSTL 224.2. Applicability of Judicial Discipline and Precedent:The Tribunal acknowledged the principle of judicial discipline, noting that the Rajasthan High Court had ruled in favor of the appellant, which led to the refund being granted. However, the Bombay High Court's Larger Bench decision in Gauri Plasticulture clarified that refund of unutilized Cenvat credit is not permissible, distinguishing the Rajasthan High Court's ruling. The Tribunal emphasized that it must follow the law declared by the Larger Bench of the High Court.3. Interpretation of Rule 5 of the Cenvat Credit Rules, 2004:The Tribunal examined Rule 5, which permits refund of unutilized Cenvat credit only for inputs used in exported goods. The Tribunal reiterated that the appellant's claim for refund of unutilized Cenvat credit due to cessation of manufacturing activities was not permissible under Rule 5, aligning with the Bombay High Court's interpretation.4. Authority of the Tribunal to Grant Interest:The Tribunal held that it lacked the authority to grant interest on refunds where the refund itself was not maintainable under the law. The Tribunal cited the Allahabad High Court's decision in Prestige Engineering (India) Pvt. Ltd., which stated that Central Excise Authorities and the Tribunal cannot award interest under Section 11B of the Central Excise Act.5. Limitation Period for Claiming Interest:The Tribunal did not delve into the issue of limitation, as it had already determined on merits that the appellant was not entitled to interest on the delayed refund. The Tribunal upheld the Adjudicating Authority's decision rejecting the interest claim on the ground of limitation.Conclusion:The Tribunal concluded that the appellant was not entitled to interest on the delayed refund of unutilized Cenvat credit. The refund was granted solely due to the Rajasthan High Court's order, which did not address the issue of interest. The Tribunal dismissed the appeal, upholding the impugned order and emphasizing that the statutory provisions and judicial precedents did not support the appellant's claim for interest.