2000 (11) TMI 460 - AT - Central Excise

CEGAT Cannot Award Interest on Delayed Refunds - Matter Referred to Larger Bench

The Tribunal held that CEGAT lacks inherent power to award interest on delayed refunds as it is a statutory body and cannot exceed statutory provisions. ... Power to award interest on belated tax refunds - tribunal as creature of statute - inherent powers - control over departmental authorities - orders and directions to give effect to tribunal orders - equitable jurisdictionPower to award interest on belated tax refunds - tribunal as creature of statute - inherent powers - orders and directions to give effect to tribunal orders - Referral to a Larger Bench for determination of whether the Tribunal has power to award interest on belated refunds and related consequential relief - HELD THAT: - The Bench examined conflicting authorities: earlier Tribunal decisions directing payment of interest and costs, High Court decisions holding that the Tribunal (a creature of statute) lacks power to award interest in the absence of statutory authority, and provisions relied upon in subordinate Rules (Rules 40 and 41 of the CEGAT (Procedure) Rules, 1982). The Bench also considered the Interest Act and constitutional principles regarding taxation and refunds but found divergent judicial views on whether such power can be derived from inherent jurisdiction, subordinate rules, or other statutes. In view of these conflicting precedents and the fundamental importance of the question, the Bench concluded it was not appropriate to decide the matter in the present appeals and that the issue requires authoritative resolution by a Larger Bench of the Tribunal. [Paras 16, 17]Matter referred to a Larger Bench of the Tribunal for final disposal; papers to be transferred to the Central Registry at Delhi.Final Conclusion: The Bench declined to decide the substantive question whether the Tribunal may award interest on belated refunds in the face of conflicting authorities and statutory considerations, and directed that the issue be placed before a Larger Bench for final disposal; the papers are to be transferred to the Central Registry, Delhi. Issues Involved:1. Entitlement to interest on delayed refund of pre-deposit.2. Jurisdiction of CEGAT to award interest on delayed refunds.Detailed Analysis:1. Entitlement to Interest on Delayed Refund of Pre-Deposit:The appellants, M/s. Sachin Textiles Pvt. Ltd., initially deposited Rs. 5 lakhs as a precondition for the hearing of their appeal. After the appeal was allowed, they requested a refund of the pre-deposit. The jurisdictional Assistant Commissioner rejected the claim on the ground of limitation, but the Commissioner (Appeals) set aside this order, stating that the amount deposited pursuant to CEGAT's order would not fall under the provisions of Sec. 11B of the Central Excise Act, 1944. After further correspondence, the refund was sanctioned, but the appellants then requested interest on the belated refund, which was dismissed by the Assistant Commissioner and upheld by the Commissioner (Appeals) on the grounds that it was not covered under Sec. 11BB of the Act.Similarly, in another case, the appellants deposited Rs. 10 lakhs as a precondition for hearing their appeal, which was later allowed. They requested a refund of the pre-deposit, which was sanctioned, but their demand for interest on the delayed refund was rejected by the jurisdictional Assistant Commissioner, leading to the present appeal.2. Jurisdiction of CEGAT to Award Interest on Delayed Refunds:The appellants relied heavily on various decisions by different Benches of the Tribunal where interest was awarded under similar circumstances. Some cited cases include:- ITC Bhadrachalam Paper Boards Ltd. v. CCE, Hyderabad- Sawhney Export House (P) Ltd. v. CC, New Delhi- Konark Cement & Asbestos Ltd. v. CCEHowever, contrary to these decisions, there are judgments by the Tribunal and High Courts holding that the power to award interest does not vest in CEGAT. For instance, in the case of Skantrons (P) Ltd. v. CC, New Delhi, the Tribunal held that it could not grant interest on belated refunds as it was a creature of the statute and could not go beyond the provisions of the parent Act.The Orissa High Court in C.C. Ex. & Cus. v. Golden Hind Shipping (India) Pvt. Ltd. examined whether the power to make such orders arose from Sec. 129B(1) of the Customs Act, which allows the Appellate Tribunal to pass orders as it thinks fit. The High Court concluded that the powers vested in the Income Tax Appellate Tribunal were broader than those vested in CEGAT, and thus, CEGAT did not have inherent power to award interest.Similarly, the Allahabad High Court in Prestige Engineering (India) Pvt. Ltd. v. U.O.I. held that the Act and the Rules did not provide for payment of interest in case of refund of duty, and the authorities under the Act, including the CEGAT, had no power to award interest.The Supreme Court in U.O.I. v. E. Merck (India) also reviewed the writ jurisdiction of High Courts on equitable grounds and their awarding of interest, emphasizing that the authority to make orders directing payment of interest must arise from the statute.Conclusion:The Tribunal concluded that for making orders directing payment of interest, the authority must arise from the statute, and since CEGAT is a creature of the statute, it is not vested with this authority in the absence of specific delegation. The Tribunal also examined Rules 40 and 41 of the CEGAT (Procedure) Rules, 1982, which enable the Tribunal to make necessary orders to give effect to its decisions. However, the Tribunal found that these rules did not bridge the gap arising from the language of Sec. 129B(1) of the Customs Act or Sec. 35 of the Central Excise Act.Given the conflicting judgments and the importance of the issue, the Tribunal requested the Hon'ble President to constitute a Larger Bench to settle the matter. The Registry was directed to transfer the papers to the Central Registry at Delhi for further proceedings.