2006 (8) TMI 75 - AT - Central Excise

Refund of Interest - Maintainability of - Anywhere any amount is wrongly collected - Amount to be refunded alongwith any amount recovered as interest - Matter remanded to adjudicating authority on the issue of unjust enrichment

Summary

Issues:
- Rejection of refund claim for interest paid under Central Excise Act and Rules
- Applicability of principles of unjust enrichment on refund claims

Analysis:
The appellant filed appeals against an order rejecting their claim for a refund of interest paid, citing the absence of a provision for interest refund under the Central Excise Act or Rules. The appellants, engaged in manufacturing excisable goods under the Modvat scheme, had paid duty on transferred inputs based on valuation rules. Subsequently, they filed refund claims for excess duty and interest following a Board's Circular clarifying credit for transferred inputs. The adjudicating authority and Commissioner held the appellants entitled to the excess duty but rejected the interest refund claim due to unjust enrichment concerns, unchallenged by the appellant.

The appellant argued, citing precedents, that interest, though not part of duty, should be refunded when wrongly collected. The Revenue contended that refund claims must adhere to principles of natural justice, referencing a Supreme Court decision. The Tribunal, relying on case law, held that any wrongly collected amount, including interest, should be refunded to the assessee, irrespective of statutory provisions. The Tribunal found the appellant's interest refund claim valid but remanded the matter to the adjudicating authority for consideration under the unjust enrichment principle, following the Supreme Court's decision. The appeals were disposed of accordingly, emphasizing the need for a fresh decision considering unjust enrichment provisions.