2006 (12) TMI 399 - AT - Central Excise

Summary

Issues Involved:
The issues involved in this case are the eligibility of the respondent for 100% credit under Modvat Rules, the rejection of refund claims by the lower authority, the claim for interest under Section 11BB, and the applicability of Section 11BB to the refund of credit.

Eligibility for 100% Credit under Modvat Rules:
The respondents imported capital goods under project import and claimed credit for the entire amount of CVD duty paid, which was allowed as credit to the extent of 75% only. They were directed to reverse the excess credit by the jurisdictional superintendent. The respondents filed refund claims for the reversed amounts, stating they were eligible for 100% credit as per Rule 57Q. The lower authority rejected the refund claims initially, but on appeal, the Commissioner (Appeals) set aside the orders and allowed the credit amounting to Rs. 1,83,69,451.

Rejection of Refund Claims and Claim for Interest under Section 11BB:
The respondents filed refund claims for interest amounting to Rs. 1,12,86,426 under Section 11BB, which were initially rejected by the Assistant Commissioner but later allowed by the Commissioner (Appeals). The Revenue appealed against this decision, arguing that interest is payable only if the refund is not granted within three months of filing the claim. The Revenue contended that since the credit was allowed by the Commissioner (Appeals) within three months, no interest is payable. However, the respondents argued that interest is due if the refund is not sanctioned within three months from the date of receipt of the application, citing the explanation to Section 11BB.

Applicability of Section 11BB to Refund of Credit:
The Revenue argued that Section 11BB applies to the refund of duty and not credit, as credit of CVD duty is not excise duty. The respondents, on the other hand, relied on a Gujarat High Court judgment stating that Modvat credit is a constituent of duty, and refund of erroneously reversed credit falls under the purview of Section 11B. The Tribunal held that the refund of erroneously reversed credit qualifies for interest under Section 11BB, and since the refund claims were filed in 1997 and sanctioned in February 2003, the respondents are entitled to interest as per the provision of Section 11BB. The Tribunal dismissed the Revenue's appeal, upholding the order of the Commissioner (Appeals).