2004 (12) TMI 107 - AT - Customs

Interest not payable on redemption fine & penalty refunds post higher court order reversal

The Appellate Tribunal CESTAT, Mumbai held that no interest is payable on redemption fine and penalty when refunding them after the original order is set ... Interest Issues:1. Whether interest is payable on redemption fine that had to be refunded when the original order was set aside by a higher judicial forum.Analysis:The judgment by the Appellate Tribunal CESTAT, Mumbai dealt with the issue of whether interest is payable on redemption fine when it has to be refunded due to the setting aside of the original order by a higher judicial forum. The Tribunal noted that the decision in Sheela Foam Pvt. Ltd. granting interest on refund of pre-deposit of duty needed re-examination in light of the Supreme Court's decision in Orient Enterprises. The Larger Bench was constituted to determine if there was a conflict between the two decisions. The Sheela Foam case involved the department denying a refund and the Tribunal directing the Revenue to refund the amount along with interest at 12% as the relief ordered was set aside by the department. On the other hand, the Orient Enterprises case held that interest is not payable on the amount deposited towards redemption fine after the original order was set aside. The Tribunal concluded that there was no conflict between the two decisions and held that no interest is payable on redemption fine and penalty when refunding them in line with the Supreme Court's ruling in Orient Enterprises.The judgment further discussed the observations made by the Supreme Court in the Orient Enterprises case, emphasizing that interest is not payable on redemption charges paid in pursuance of an adjudication order that was later set aside. The Court clarified that the direction for payment of interest in such cases was a consequential relief and not a universal application. The Tribunal highlighted that the circumstances under which interest is payable on delayed refunds are specified in the Central Excise Act and Customs Act. The decision in Sheela Foam pertained to the deposit made towards duty during an investigation and not the fine paid under an adjudication order, which was the focus of the Orient Enterprises case. The Tribunal ultimately held that the appellant's claim for interest on the redemption fine could not be upheld based on the Supreme Court's ruling.In conclusion, the appeals were disposed of by rejecting the claim for refund, as the appellants were not entitled to it in the present case. The judgment clarified that interest is not payable on redemption fine and penalty when refunding them following the setting aside of the original order by a higher judicial forum, aligning with the decision in the Orient Enterprises case. The Tribunal found no conflict between the decisions in Sheela Foam and Orient Enterprises, as they dealt with different aspects of interest payment in refund cases.