2010 (12) TMI 278 - AT - Central Excise

Refund - The original TRC was produced on 01.09.2004 and refund order was passed on 14.09.2004 - However, no interest was granted - The respondents therefore, filed appeal before the Commissioner (Appeals) which came to be allowed and the Commissioner directed payment of interest from the date of the order of the Tribunal - Held that - certainly the amount was required to be refunded within three months from the date of declaration of the order. Since the order was pronounced in the open Court, and absence of knowledge of the said order can not be pleaded and the interest liability obviously would commence w.e.f. 01.04.2004. Obviously, to that extent, the Commissioner (Appeals) erred in directing payment of interest from 31.12.2003. - the appeal partly succeed, the impugned order is modified to the extent that the interest liability would commence from 01.04.2004.

Summary

Issues:
Dispute over interest liability start date in case of refund of deposited amount under Section 35FF of the Central Excise Act, 1944.

Analysis:
The judgment revolves around the issue of determining the commencement date of interest liability concerning the refund of an amount deposited by the assessee as per the order under Section 35FF of the Central Excise Act, 1944. The respondents had initially deposited the amount based on the Tribunal's order on 21.11.2002. Subsequently, the appeal favored the respondents on 31.12.2003, leading them to seek a refund. The contention arose when no interest was granted on the refund despite the delay in repayment. The Commissioner (Appeals) directed the payment of interest from the date of the Tribunal's order, which was challenged by the appellant.

The appellant argued that there was no legal provision entitling the assessee to claim interest from the date of the Tribunal's order. Reference was made to Section 11BB, suggesting that interest should accrue from the expiry of three months from the refund application date. Legal precedents, such as the Supreme Court decision in Commissioner of Central Excise, Hyderabad vs. ITC Ltd., and the Tribunal's ruling in Samarth Engineering Co. Pvt. Ltd. vs. Commissioner of C. Ex. Jamshedpur, were cited to support this argument.

Conversely, the respondents' advocate highlighted the amended provision in Section 35FF, emphasizing that interest is due unless the refund is processed within three months. The amended provision clarifies that interest accrues if the refund is delayed beyond the specified period, irrespective of the amendment's effective date.

The judgment emphasized that once the final authority deems the amount non-payable to the Revenue, withholding the funds from the assessee is unjustifiable. The amended provision under Section 35FF mandates the refund of unlawfully withheld amounts along with interest if delayed beyond three months from the order communication date. The ruling stressed that the government must pay interest on delayed refunds, recoverable from responsible officers, without justifying any delay in payment. Consequently, interest liability commences from the date the refund should have been made, typically three months after the order communication date.

Ultimately, the judgment partially favored the appellant, modifying the interest liability commencement date to 01.04.2004 instead of the earlier directed date of 31.12.2003. This decision aligned with the legal provisions and principles outlined in the Central Excise Act, ensuring timely and fair treatment in refund matters.