2011 (4) TMI 596 - HC - Central Excise

Refund - when once the assessee was liable to pay interest and the said order has not been challenged by the assessee in a manner known to law, the authorities were justified in deducting the said amount of interest out of the amount ordered to be refunded - Insofar as the understanding of the assessee regarding the liability to pay interest is concerned, it is contrary to law. - Within three moths from the date of adjudication, he is liable to pay duty but that duty ought to have been paid on the due date and since it is not paid on the due date, from that day when it was legally liable to be paid, till the date of actual payment of adjudication, the assessee is liable to pay interest - Decided in favour of the revenue

Summary

Issues:
- Appropriation of interest from the amount to be refunded.
- Liability to pay interest on duty amount.
- Adjudication of interest payable before deduction.

Issue 1: Appropriation of interest from the amount to be refunded
The case involved a revenue appeal challenging the Tribunal's order that set aside the deduction of interest from the amount to be refunded. The adjudicating authority had sanctioned a rebate but appropriated an amount of interest payable by the assessee from the refund. The Tribunal held that unless the interest payable was determined by the adjudicating authority, the appropriation of interest from the rebate would be illegal. The Tribunal found that the interest claimed was not in accordance with the law and directed the revenue to pay the refund in its entirety. The revenue appealed against this decision.

Issue 2: Liability to pay interest on duty amount
The Appellate Tribunal noted that the revenue had issued a notice to the assessee to work out the interest on the duty amount and remit it to the Government account. The assessee contended that interest liability starts if the adjudicated amount is not paid within three months. The revenue claimed a specific sum towards interest, which was justified as the assessee was liable to pay interest from the date of adjudication till the actual payment. The assessee's understanding of the liability to pay interest was deemed contrary to the law, and the amount claimed was upheld.

Issue 3: Adjudication of interest payable before deduction
The assessee relied on a judgment to argue that without a formal adjudication of interest payable, the authorities could not deduct the amount. However, the Court found that a notice claiming interest was issued, replied to by the assessee, and a calculation was made before deduction. The Court clarified that the judgment cited by the assessee did not apply in this case as the interest payable was determined and communicated to the assessee before deduction.

In conclusion, the High Court allowed the appeal, setting aside the Tribunal's order and restoring the original authority's decision to deduct interest from the refund. The Court held in favor of the revenue, stating that the assessee was liable to pay interest on the duty amount from the date of adjudication till actual payment, rejecting the assessee's argument against the deduction of interest.