2010 (6) TMI 402 - AT - Central Excise

Recovery Adjustment from refund - Section 11 of the said Act provides that in respect of duty and any other sums of any kind payable to the Central Government under any of the provisions of the said Act or of the rules made there under, the officer empowered under the provision of law could require the payment of such sums or may deduct the amount so payable from any money owing to the persons from whom such sums may be recoverable or due - Deputy Commissioner in the matter in hand was justified in adjusting the amount due to the Government from the amount refundable to the respondents - Commissioner (Appeals) having erred in ignoring the statutory provision and factual aspects of the matter which were required to be considered

Issues:
1. Refund of excess amount sanctioned by Deputy Commissioner
2. Appropriation of amount towards dues payable to the Government
3. Claim of interest by the Respondents
4. Interpretation of Section 11BB of Central Excise Act, 1944
5. Adjustment of amount due to the Government
6. Justification of payment of interest by the Commissioner (Appeals)

Analysis:

1. The appeal stemmed from an order by the Commissioner (Appeals) modifying the Deputy Commissioner's decision regarding the refund of Rs. 3,32,496 to the Respondents. The Deputy Commissioner had sanctioned the refund, but Rs. 1,99,472 were appropriated towards dues payable by the Respondents, with the balance of Rs. 1,43,024 ordered to be paid to them. The Commissioner (Appeals) directed the total amount to be refunded to the Respondents and allowed the claim of interest from a specific date.

2. The contention raised was that the Commissioner (Appeals) erred in ordering interest payment even before the application for refund, contrary to Section 11BB of the Central Excise Act, 1944. The argument was that interest should only be paid after three months from the application date. Additionally, the issue of adjustment of the amount due to the Government was raised, emphasizing the authority's power to deduct sums payable under the Act.

3. The judgment highlighted the statutory provision under Section 11 of the Act, which allows the officer to adjust sums due to the Government from any refundable amount. It was emphasized that without a stay on the duty liability confirmed by the adjudicating authority, the Deputy Commissioner was justified in the adjustment. The Commissioner (Appeals) was criticized for overlooking this provision and factual considerations.

4. Regarding the claim of interest, Section 11BB was invoked, stating that failure to refund within three months entitles the claimant to interest. The judgment clarified that once the dispute is settled in favor of the assessee, the Government must pay interest on the refunded amount, as holding otherwise would lead to unjust enrichment. The principle of unjust enrichment was deemed applicable to the Government as well.

5. Ultimately, the appeal partly succeeded, confirming the adjustment ordered by the adjudicating authority and setting aside the Commissioner (Appeals) order in that regard. The direction for interest payment was upheld, and no further interference was deemed necessary. The judgment concluded by disposing of the appeal accordingly.

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