2007 (3) TMI 447 - AT - Central Excise

Summary

Issues involved:
Rejection of refund claim of interest on belatedly sanctioned refund amount due to encashment of bank guarantee by Revenue authorities.

Analysis:
The appeal challenges the rejection of a refund claim for interest on a refund amount sanctioned late by authorities due to encashment of a bank guarantee. The appellant had a classification dispute with the Revenue, resolved in their favor in 1991. Subsequently, the Revenue encashed the bank guarantee before the appeal was allowed. The appellant filed a refund claim after the appeal success, seeking interest per Section 11BB of the Central Excise Act. The lower authorities rejected the claim, stating the encashed amount wasn't duty paid. The appellant argued the encashment should be considered a pre-deposit, citing a Tribunal case. The Revenue contended the encashment doesn't fall under Section 11B. The Tribunal analyzed the situation post-Section 11BB enactment, determining if encashment was a pre-deposit or dues recovery. It found the encashment akin to a pre-deposit under Section 35F, thus the amount should be refunded with interest if delayed, aligning with the L&T case judgment.

The Division Bench emphasized that the judgment in the Oswal Agro Mills case doesn't apply to encashment against a confirmed demand. It highlighted the need for timely refund of pre-deposited duty post successful appeal. Interest was deemed payable beyond the stipulated period. The Tribunal set aside the impugned order based on the similar facts to the L&T case, allowing the appeal with consequential relief.

In conclusion, the Tribunal ruled in favor of the appellant, setting aside the rejection of the refund claim for interest on the belatedly sanctioned refund amount due to the encashment of the bank guarantee. The decision was based on the interpretation of the encashment as a pre-deposit, aligning with Section 35F requirements and the L&T case judgment, emphasizing the need for timely refunds and interest payments.