Refund of interest paid against a demand was allowed after appellate relief, with Section 11B held no bar

Interest paid by an assessee pursuant to a demand and debited in RG 23A Part-II was held refundable after the underlying demand was substantially set aside in appellate proceedings. The Revenue's objection that Section 11B of the Central Excise Act, 1944 applies only to duty and not to interest was rejected. The refund was treated as a direct consequence of the earlier appellate relief, and the fact that the Revenue had accepted the debit when made prevented it from disputing the payment mode at the refund stage. Section 11B was therefore no bar to refund of the amount paid against the displaced demand.

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Issues: Whether interest paid by the assessee pursuant to a demand, and debited in RG 23A Part-II, was refundable despite the Revenue's objection that Section 11B of the Central Excise Act, 1944 covers only duty and not interest.

Analysis: The refund arose as a consequence of the Tribunal's earlier order setting aside the demand except to a limited extent. The Revenue had accepted the debit when made and could not object to the mode of payment only when refund was sought. Section 11B was held to be no bar to refund of an amount paid by the assessee on account of a demand that was subsequently displaced by appellate relief. The refundable amount was treated as a consequence of the successful appeal, and the objection that interest was outside Section 11B was rejected.

Conclusion: The interest amount was held to be refundable, and the Revenue's appeal failed.

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