2009 (5) TMI 700 - AT - Central Excise

Issues Involved:
1. Whether the filing of a reference application under Section 35G prior to 1-7-99 extends the three-month period specified under Section 11BB of the Central Excise Act, 1944, for the purpose of demanding interest on the refundable amount.

Issue-wise Detailed Analysis:

1. Filing of Reference Application and Extension of Refund Period:
The core issue is whether the filing of a reference application under Section 35G, as it stood before 1-7-99, extends the three-month period specified under Section 11BB for the demand of interest on the refundable amount.

2. Facts of the Case:
The appellants were required to deposit Rs. 1,31,00,000 during the proceedings to stay the execution of an order demanding duty. The Tribunal quashed the demand, and the appellants sought a refund of the deposited amount. The Department refunded the amount but did not pay interest for the delay. The appellants' repeated reminders and subsequent appeal for interest were rejected.

3. Appellants' Argument:
The appellants argued that under Section 11BB, the department must refund the amount within three months from the application date, failing which interest is payable for the delayed period. They cited judgments from the Rajasthan High Court (J.K. Cement Works) and Allahabad High Court (Hamdard (Wakf) Laboratories), which interpreted Section 11BB as mandatory, requiring the payment of interest on delayed refunds.

4. Department's Argument:
The Department contended that since they had filed a reference application against the Tribunal's order, and the amount was refunded within three months from the disposal of the reference application, the appellants were not entitled to interest under Section 11BB.

5. Tribunal's Analysis:
The Tribunal noted that the appellants deposited Rs. 1,31,00,000 during the proceedings, and the Tribunal's order quashed the demand, making the amount refundable. The Tribunal emphasized that Section 11BB mandates the payment of interest if the refund is not made within three months from the application date, regardless of any pending reference application.

6. Interpretation of Section 11BB:
The Tribunal highlighted that Section 11BB requires the department to pay interest if the refund is delayed beyond three months from the application date. The Tribunal referred to various High Court judgments, including J.K. Cement Works and Hamdard (Wakf) Laboratories, which held that interest is payable from the expiry of three months from the refund application date.

7. Effect of Reference Application:
The Tribunal rejected the Department's argument that the reference application extended the refund period. It clarified that the filing of a reference application does not automatically stay the refund process. The Tribunal noted that there was no provision for an automatic stay under Section 35G, and the Department had no right to retain the amount without a specific stay order.

8. Conclusion:
The Tribunal concluded that the Department's refusal to pay interest was contrary to Section 11BB. It set aside the orders of the Additional Commissioner and Commissioner (Appeals) and directed the Department to calculate and pay interest to the appellants as per Section 11BB, considering the relevant High Court rulings.

9. Order:
The Tribunal allowed the appeal, directing the Department to calculate the interest based on the rate fixed by the Board for the relevant period under Section 11BB and pay the entire amount within six weeks.

Summary:
The Tribunal ruled that the filing of a reference application under Section 35G does not extend the three-month period specified under Section 11BB for the demand of interest on refundable amounts. The Department must pay interest if the refund is delayed beyond three months from the application date. The Tribunal set aside the lower authorities' orders and directed the Department to calculate and pay the interest due to the appellants.

← Previous Next →