2010 (10) TMI 190 - HC - Central Excise

Refund of cenvat credit - interest on delayed refund - under provisions of clause (c) of the proviso to sub-section (2) of Section 11B and Section 11BB of the Act - interest on delayed refund Allowed. When Section 11BB of the Act had newly been inserted by the Finance Act, 1995, the Government of India, Ministry of Finance (Department of Revenue) has issued Circular 130/41/95-CX., dated 30th May, 1995 - as per the instructions issued by the Central Government refunds under Rule 57F of the erstwhile Central Excise Rules, 1944 would be governed by the provisions of Section 11BB of the Act. Rule 57F of the said Rules made provision for the manner of utilisation of inputs and credit allowed in respect of duty paid thereon. Sub-rule (13) of rule 57F made provision for refund of accumulated credit in case where for any reason it was not possible to adjust the same in the manner provided under the said sub-rule. Sub-rule (13) of Rule 57F of the said Rules is more or less in pari materia to the provisions of Rule 5 of the Cenvat Credit Rules, 2002/2004. Thus, the instructions issued by the Central Government under the aforesaid Circular would also be applicable to refunds under rule 5 of the Rules, which instructions are binding on the revenue.

Summary

Issues Involved:

1. Applicability of Section 11BB of the Central Excise Act, 1944 for interest on delayed refund of Cenvat Credit.
2. Interpretation of Rule 5 of the CENVAT Credit Rules, 2002/2004.
3. Relevance of C.B.E. & C. Circular No. 130/41/95-CX., dated 30-5-95.

Issue-wise Detailed Analysis:

1. Applicability of Section 11BB of the Central Excise Act, 1944 for interest on delayed refund of Cenvat Credit:

The core issue is whether the provisions of Section 11BB, which mandates interest on delayed refunds, apply to refunds under Rule 5 of the CENVAT Credit Rules. The Tribunal held that Section 11BB is applicable, as the refund under Rule 5 falls within the ambit of Section 11B(2) of the Act. The Tribunal observed that the refund of Cenvat Credit is essentially a refund of duty paid on inputs used in the manufacture of exported goods, which aligns with the provisions of Section 11B. Consequently, any delay in sanctioning such refunds would attract interest under Section 11BB.

2. Interpretation of Rule 5 of the CENVAT Credit Rules, 2002/2004:

Rule 5 of the CENVAT Credit Rules allows for the refund of Cenvat Credit when inputs or input services are used in the manufacture of exported goods, and adjustment of such credit is not possible. The appellant argued that Rule 5 and the associated notifications do not provide for interest on delayed refunds. However, the Tribunal noted that Rule 5 refunds are covered under Section 11B(2) of the Act, which mandates that such refunds be paid to the applicant if the duty paid on inputs is refundable. Therefore, Rule 5 refunds are subject to the interest provisions of Section 11BB in case of delays.

3. Relevance of C.B.E. & C. Circular No. 130/41/95-CX., dated 30-5-95:

The Tribunal referenced the C.B.E. & C. Circular, which included the receipt of credit of duty paid on excisable goods used as inputs among the types of claims where interest under Section 11BB may be payable. This circular supports the interpretation that refunds of Cenvat Credit under Rule 5 should attract interest if delayed. The Tribunal emphasized that these instructions are binding on the revenue authorities, reinforcing the applicability of Section 11BB to Rule 5 refunds.

Conclusion:

The Tribunal concluded that the provisions of Section 11BB of the Central Excise Act, 1944, apply to delayed refunds under Rule 5 of the CENVAT Credit Rules. The Tribunal found no legal error in its decision to award interest on such delayed refunds, dismissing the appeals on the grounds that no substantial question of law was raised. This judgment underscores the obligation to pay interest on delayed refunds of Cenvat Credit, aligning with the statutory framework and binding circulars.