TaxTMI 
TaxTMI 
2013 (6) TMI 88
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....ners were classifiable under Chapter 39 of the Central Excise Tariff Act, 1985 as articles of plastic. Revenue, however, held an opinion that such goods were classifiable under Chapters 54 and 63 as textile articles. As per the petitioners' understanding of the classification, rate of duty applicable to such goods, exemption from payment of certain duties as well as facility of modvat credit on the inputs used in the manufacturing of such goods was more favourable to the petitioners. Under the insistence of the Department, however, the petitioners paid higher duty under protest for the period between February, 1987 to February, 1992. The Madhya Pradesh High Court in the case of Raj Pack Well Ltd. and Others reported in 1990 (50) E.L.T. 201 decided the issue in favour of the trade and held that such goods were classifiable under Chapter 39 of the Tariff. The Central Board of Excise and Customs ('C.B.E. & C.', for short) issued a Circular No. 8/92 dated 24-9-1992 in exercise of powers under Section 37B of Central Excise Act, 1944 ('the Act', for short) clarifying that the goods in question would be classifiable under Chapter 39. 4. In the meantime, since the adjudicating authority....
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....ppellate order of the Commissioner in which he provided for further refund of Rs. 1,02,53,112/- with interest, if any, payable under Section 11BB of the Central Excise Act, 1944, the Deputy Commissioner passed a consequential order dated 13-3-2003. In such order, though he sanctioned the refund for a sum of Rs. 1,02,53,118/-, he did not allow any interest under Section 11BB of the Act observing that the entitlement to refund arises only when the appeal is finally disposed off in the party's favour. The Deputy Commissioner relied on a decision of CEGAT in case of Bharat Heavy Electricals Ltd. v. Commissioner of C. Ex., Meerut reported in 2002 (139) E.L.T. 591 (Tribunal) for this purpose. Relevant portion of such order dated 13-3-2003 reads as under :- "As regards the issue of interest under section 11BB of the Central Excise Act, 1944, is concerned, it is clear that the entitlement to refund arises only when the appeal is finally disposed off in the party's favour. This view has also been held by the Hon'ble CEGAT in the case of Bharat Heavy Electrical Ltd. v. CCE, Meerut reported in 2002 (139) E.L.T. 591 (Tribunal). In this case the Commissioner (A) has finally disposed off the ....
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....t aside the impugned order and allow the appeal in terms of para 6 above." 8. Armed with such order of the Commissioner dated 31-5-2004, the petitioners once again filed a claim of interest before the Assistant Commissioner for a sum of Rs. 1,11,72,895/-. The Assistant Commissioner allowed a portion thereof by his order dated 23-9-2004. He sanctioned interest to the tune of Rs. 1,06,12,678/-. Remaining claim of Rs. 5,60,217/- was rejected on the ground that the same pertains to the period before insertion of Section 11BB in the Act. The case of the petitioners is that the interest was released only in September, 2004 on the principal claim of refund which was held payable as far back as in 18-2-1999 by the Commissioner (Appeals). Thus, there was considerable delay in paying interest on the refund claim and such payment of interest should, therefore, carry further interest. 9. The petitioners filed a fresh claim before the Assistant Commissioner in which they claimed a sum of Rs. 39,79,530/- towards interest for the period prior to 26-5-1995 when Section 11BB was not introduced in the Act. They claimed a further sum of Rs. 18,90,549/- as interest on such interest. The petition....
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.... that the petitioners were entitled to refund, such refund ought to have been released alongwith interest. Such interest would become due after three months from the date of refund application. Though the Appellate Commissioner had directed the Assistant Commissioner to grant such refund as payable under Section 11BB of the Act, the Assistant Commissioner failed to provide for any such interest. The petitioners, therefore, had to carry out further appellate proceedings. (3) The counsel submitted that despite the petitioners succeeding on the legal issue, the Assistant Commissioner initially did not release substantial portion of the refund claim on the ground of unjust enrichment at which stage also the petitioners had to approach higher authorities for correction of such order. (4) Counsel submitted that in the facts of the present case, the Department cannot escape the liability of paying interest on interest merely on the ground that the statutory provisions do not specifically provide for the same. Counsel submitted that the present is a case of extreme hardship and even in the facts of the case, such interest should be held payable. 13.1 In support of his contentions,....
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....sel contended that the position was made amply clear by the Government of India itself under which it was clarified that interest would be payable after three months of the receipt of the refund application and not from the date of the appellate order finally allowing the appeal of the assessee. On this basis, the counsel would contend that the Assistant Commissioner had no reason whatsoever to reject the petitioners' claim for interest. 14. On the other hand, learned counsel Shri Ravani appearing for the Department opposed the petition contending that in absence of any statutory provision providing for interest on interest, the petitioners' claim was rightly rejected by the revenue authorities. He submitted that the Assistant Commissioner had proceeded on the basis of law declared by the Tribunal in the case of Bharat Heavy Electricals Ltd. (supra) which was prevailing at the relevant time. He submitted that on the basis of such decision, if the Assistant Commissioner construed the statutory provision as to making interest payable to the petitioners only after a period of three months from the date of the appellate order allowing the petitioners' claim for refund, it cannot be ....
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....the ground that the petitioners failed to establish that there was no unjust enrichment. The petitioners were once again compelled to approach the Appellate Commissioner who while granting additional refund of Rs. 1,02,53,118/- by his order dated 18-2-1999 further provided that such refund shall be paid alongwith interest, if any, under Section 11BB of the Act. Pursuant to such order, the Deputy Commissioner though granted the refund of the principal sum, held that no interest was payable on the ground that entitlement to refund arises only when the appeal is disposed off in favour of the petitioners. In the present case, the Commissioner (Appeals) had finally disposed off the case on 11-10-2002 and the petitioners had applied for refund on 10-1-2003. In that view of the matter, he was of the opinion that no interest under Section 11BB was payable. 16. To our mind, the Deputy Commissioner committed a serious error in making above observations. Firstly, the petitioners had lodged their refund claims at the relevant time itself way back in the year 1991 when the question of classification was decided in their favour by the Commissioner. Secondly, the Department did not release the....
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....und of Rs. 10,000/- and on appeal the amount decided to be refunded is Rs. 30,000/- that the interest would be payable on the amount finally decided to be refundable viz. Rs. 30,000/- for the period commencing from the expiry of three months from the date of refund application till its payment. With respect to Section 11BB of the Central Excise Act, same clarification was adopted by providing as under :- 67.6 Similarly in the Central and Salt Act, 1944, new Section 11AA and 11BB are proposed to be added and Section 37 is proposed to be amended (so as relating to MODVAT) to provide for charging of interest on delayed payment of central excise duty and payment of interest on delayed refunds of such duty. The instructions contained in paragraphs 2 and 3 above will apply mutatis mutandis in respect of case under the CESA and may be followed in the manner indicated above. The above circular was referred to and relied upon by the Division Bench of this court in case of Afrique Tradelinks Pvt. Ltd. (supra). The Bench held as under :- "11. In the facts of the instant case, while the Deputy Commissioner had determined the refund amount of Rs. 14,83,303/-, the appellate auth....
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.... may now look at some of the decisions cited before us. 19. In case of Sandvik Asia Ltd. (supra), the Apex Court considering the gross delay caused by the Department in realising the interest, held that such interest would be paid with interest. It was observed as under :- "28. In our view, there is no question of the delay being 'justifiable' as is argued and in any event if the revenue takes an erroneous view of the law, that cannot mean that the withholding of monies is 'justifiable' or 'not wrongful'. There is no exception to the principle laid down for an allegedly 'justifiable' withholding, and even if there was, 17 (or 12) years delay has not been and cannot in the circumstances be justified." 20. Way back in the year 1992, a Division Bench of this court in case of D.J. Works (supra) had similarly in the background of the Income Tax Act, 1961 held that the assessee would be entitled to interest on delayed payment of interest. 21. We are conscious that ordinarily grant of interest flows either from statutory provision or contractual relations between the parties. In the present case, there is no statutory provision providing for interest on interest. In the presen....