2011 (3) TMI 571 - HC - Central Excise

Refund - Adjustment of interest due on belated duty - Held that - held that, only the money which is already adjudicated to be due by the assessee to the Department can be adjusted, but the amount ordered to be refunded cannot be adjusted towards a mere claim, that is, even before adjudication of the said claim - Decided in favor of the assessee

Summary

Issues:
1. Adjustment of refund towards interest claimed by the revenue.
2. Interpretation of Section 11AA in relation to the claim for interest.
3. Entitlement of the assessee to the cost of proceedings.

Analysis:

1. The primary issue in this case revolves around the adjustment of the refund amount towards the interest claimed by the revenue. The Tribunal set aside the order passed by the Appellate Authority and the Original Authority, which had adjusted the refund amount towards the interest payable for delayed duty without any prior adjudication of the interest claim. The Tribunal held that only amounts adjudicated to be due by the assessee can be adjusted, not amounts ordered to be refunded. The Court affirmed this decision, emphasizing that adjusting the refund towards a mere claim before adjudication is impermissible in law.

2. The Court delved into the interpretation of Section 11AA, inserted by Act 22 of 1995, which governs the claim for interest in cases of belated duty payments. In this instance, the revenue sought interest for delayed duty payments dating back to 1982-83 to 1984-85. The Court found this claim baseless, noting that the revenue's attempt to withhold legitimate amounts due to the assessee under the guise of interest was unjustifiable. The Court ruled in favor of the assessee, highlighting that the interest claim lacked a legal basis and awarded the assessee the cost of proceedings.

3. Lastly, the Court addressed the entitlement of the assessee to the cost of proceedings. Given the unjustifiable nature of the revenue's interest claim and the legitimate entitlement of the assessee to the refund amount, the Court deemed it appropriate to award the assessee the cost of the proceedings. The Court dismissed the appeal, answered the substantial question of law in favor of the assessee, and directed the appellant to pay a cost of Rs. 5,000 to the respondent within four weeks from the date of the order.

In conclusion, the judgment clarifies the legal principles governing the adjustment of refund amounts, interprets the relevant statutory provisions, and upholds the entitlement of the assessee to the refund while penalizing the revenue for unjustified claims.