2002 (9) TMI 214 - AT - Central Excise

Tribunal clarifies interest on delayed refunds exempt under Modvat rules, not Section 11A.

The Tribunal rejected the application for interest on delayed refunds under Section 11BB, emphasizing that the refund related to Modvat credit rules and ... Interest on delayed refunds under Section 11AB - refunds arising from non-utilisation of MODVAT credit - action taken under Rule 57-I framed under Section 37B - inapplicability of Section 11A to MODVAT/Rule 57-I refundsInterest on delayed refunds under Section 11AB - refunds arising from non-utilisation of MODVAT credit - inapplicability of Section 11A to MODVAT/Rule 57-I refunds - Whether interest is payable under Section 11AB on refunds that arose from non-utilisation of Modvat credit in respect of inputs used in exported final products. - HELD THAT: - The Tribunal found that the refunds in question arose from non-utilisation of Modvat credit taken on inputs used in the final product which was exported. The Modvat credit rules were framed by the Central Government under the provisions of Section 37B and actions under Rule 57-I (pre-amendment context) are not governed by Section 11A of the Central Excise Act. The proviso to Section 11AB was noted, and the Tribunal relied on the principle that where refunds arise from measures under Section 37B/Rule 57-I (Modvat regime), the statutory scheme of Section 11A/11AB does not apply. The Tribunal referred to the ratio of the Supreme Court in CCE, Jaipur v Raghuvar India Ltd. (2000 (118) E.L.T. 311) which held that Section 11A would have no application to actions under Rule 57-I prior to its amendment, and that Rule 57-I is not subject to Section 11A. Applying that reasoning, the Tribunal held that interest under Section 11AB is not payable on the Modvat-related refunds allowed in the appeals. [Paras 6, 7, 8]Interest under Section 11AB is not payable on refunds arising from non-utilisation of Modvat credit governed by Rule 57-I/Section 37B; the miscellaneous application for interest is rejected.Final Conclusion: The miscellaneous application for payment of interest on the allowed refunds is rejected because the refunds arose from non-utilisation of Modvat credit governed by the Modvat/Rule 57-I regime (framed under Section 37B) and therefore Section 11A/11AB does not apply. Issues:- Application for payment of interest on delayed refunds under Section 11BB- Eligibility for interest on delayed refunds under Section 11B- Interpretation of Modvat credit rules and payment of interestIssue 1: Application for payment of interest on delayed refunds under Section 11BBThe applicant filed a Misc. application seeking interest on delayed refunds. The applicant argued that under Section 11BB, interest is payable if refunds are not given within three months of the refund application. The applicant cited Notification No. 24/2001, which clarified the rate of interest payable at 9% per annum. The delay in refunds was emphasized as a burden on exporters, warranting the payment of interest.Issue 2: Eligibility for interest on delayed refunds under Section 11BThe Departmental Representative contended that interest cannot be paid on the refund amount as it was related to Modvat credit and not a direct refund of duty paid. The contention was based on the argument that Section 11AB's proviso exempts interest payment in cases where duty becomes payable due to Board instructions and is voluntarily paid without reserving the right to appeal. The Tribunal noted that the refund in question arose from non-utilization of Modvat credit, not falling under Section 11A of the Central Excise Act, thus excluding it from the provision of interest under Section 11AB.Issue 3: Interpretation of Modvat credit rules and payment of interestThe Tribunal referenced the Supreme Court's decision in CCE, Jaipur v Raghuvar India Ltd., emphasizing that the refund related to Modvat credit rules framed under Section 37B, not Section 11A. The Tribunal concluded that since the refund was due to non-utilization of Modvat credit on inputs used in the final exported product, it did not fall under Section 11A and, therefore, was not subject to interest payment under Section 11AB. Consequently, the Tribunal rejected the Misc. application for interest on delayed refunds.This judgment clarifies the distinction between refund claims under Section 11B and Modvat credit rules, highlighting the inapplicability of interest payment provisions in cases not falling under Section 11A of the Central Excise Act.