Refund of export-linked handloom cess allowed, but interest on deferred excise duty was held non-refundable.

Handloom cess paid on cloth used to manufacture exported napkins was refundable because the charging proviso excluded cloth used in export goods, and the claim fell within the refund scheme under Section 11B of the Central Excises and Salt Act, 1944. Interest collected under Rule 49A on deferred duty on cotton yarn was not refundable, because it was not duty within the excise rules and rebate or refund provisions covered duty or rebate, not interest. The result was a refund allowed for the cess, but denied for the interest.

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Issues: (i) whether handloom cess paid on cloth used in the manufacture of exported napkins was refundable under the statutory scheme; (ii) whether interest collected under Rule 49A on deferred duty on cotton yarn was refundable as duty or rebate.

Issue (i): whether handloom cess paid on cloth used in the manufacture of exported napkins was refundable under the statutory scheme.

Analysis: The cess was levied and collected through the machinery of the Central Excises and Salt Act, 1944 under sub-section (2) of Section 3 of the Khadi and Other Handloom Industries Development (Additional Excise Duty on Cloth) Act, 1953. The proviso excluded levy where the cloth was used in the manufacture of goods exported out of India. As the cloth on which cess had been paid was used in exported napkins, the claim was held to be in order and refundable under Section 11B of the Central Excises and Salt Act, 1944.

Conclusion: Refund of handloom cess was admissible and the assessee succeeded on this issue.

Issue (ii): whether interest collected under Rule 49A on deferred duty on cotton yarn was refundable as duty or rebate.

Analysis: The interest was levied under Rule 49A of the Central Excise Rules, 1944. Rebate under Rule 12A was confined to duty of excise, and Section 11B also covered refund of duty or rebate, not interest. Since the amount levied as interest was not duty within the meaning of Rule 2(v) of the Central Excise Rules, 1944, its refund was not legally permissible.

Conclusion: Refund of interest was not admissible and the Revenue succeeded on this issue.

Final Conclusion: The order allowing refund of handloom cess was sustained, but the order granting refund of interest was set aside, resulting in a partial success for the Revenue.

Ratio Decidendi: Where a cess is collected through the machinery of the excise law and the charging proviso excludes levy on goods used for export, refund may be claimed under the refund provision; but interest levied under a deferred duty scheme is not duty and cannot be refunded as rebate or duty refund unless the statute expressly so provides.

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