2012 (6) TMI 816 - HC - Central Excise

Summary

Issues Involved:
1. Validity of Section 154 of the Finance Act, 2003.
2. Liability to pay interest on the refunded excise duty.
3. Applicability of the principle of restitution.

Summary:

1. Validity of Section 154 of the Finance Act, 2003:
The appellants challenged Section 154 of the Finance Act, 2003, which retrospectively withdrew the exemption from excise duty granted to industrial units in the North Eastern Region. The Hon'ble Supreme Court upheld the validity of Section 154, stating that the withdrawal of exemption from the date of the notification was within the competence of the Parliament and not liable to be quashed on the ground of being unreasonable. The Court emphasized that the retrospective operation, although potentially harsh, did not invalidate the demand as the State had been deprived of revenue without any corresponding benefit.

2. Liability to Pay Interest on the Refunded Excise Duty:
The appellants contended that they should not be liable to pay interest on the refunded excise duty, particularly since they had returned the principal amount and had an interim stay in their favor until the Supreme Court's judgment. The learned Single Judge rejected this contention, holding that the appellants were liable to pay interest as per the provisions of the Finance Act, 2003. The Court clarified that the stay order did not affect the liability to pay interest, and the liability remained even after the dismissal of the writ petition.

3. Applicability of the Principle of Restitution:
The Court applied the principle of restitution, which mandates that the appellants must place the revenue in the same position it would have been but for the exemption. The Court referred to the case of South Eastern Coalfields Ltd. v. State of M.P., emphasizing that restitution aims to restore the parties to their original position before the wrongful act or order. The Court stated that an unsuccessful litigant cannot be allowed to enjoy the fruits of an interim order and must compensate for the benefits derived during the period of the stay.

Conclusion:
The appeals were dismissed, affirming the learned Single Judge's decision that the appellants were liable to pay interest on the refunded excise duty as per Section 154 of the Finance Act, 2003. The principle of restitution was upheld, ensuring that the revenue was restored to its rightful position.