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2013 (8) TMI 268 - HC - Central ExciseInterest on refund under section 11BB of the Central Excise Act - Application for refund was filed by the petitioner on March 29, 2000 - The amount claimed as refund being the duty paid and continued to lie as pre-deposit - Tribunal decided in favour of the present appellants on September 3, 2001, and also further held that payment of interest would start running from September 3, 2001 Held that - Any delay having been occasioned in refunding the amount beyond the period of thee months, would attract interest - The refund of amount considered as predeposit would be at par with the refund of duty and the interest would be payable on such pre-deposit, relying upon the judgment of the Apex Court in the case of Commissioner of Central Excise Vs. I.T.C. Limited 2004(12)TMI 90 SUPREME COURT OF INDIA - The refund of amount of Rs.20 Lacs had been made on February 4, 2004. Thus, there has been a delay of considerable period in returning the amount after the Appellate Tribunal held in favour of the appellants assessee. The interest on the pre-deposit is, therefore, required to be given - The claim was not barred by period prescribed under sub-section (1) of Section 11B of the Central Excise Act - Held to be entitled to the interest on the delayed refund of amount of Rs.20 Lacs for the period from September 3, 2001 to February 4, 2004 Decided in favor of Assessee.
Issues Involved:
1. Legitimacy of the excise duty demand on Draw Twisted Yarn (DTY). 2. Validity of the refund claim of Rs. 20 Lacs paid under protest. 3. Entitlement to interest on the delayed refund of Rs. 20 Lacs. Detailed Analysis: 1. Legitimacy of the Excise Duty Demand on Draw Twisted Yarn (DTY): The petitioner-company, engaged in manufacturing Draw Twisted Yarn (DTY) and Twisted Yarn (TY), was searched by the Preventive branch of Surat Commissionerate. The search revealed a "Creel Register" that recorded production on a Draw Twisted Machine (DTM), which produced both dutiable DTY and exempted TY. Some entries in the register were found canceled, leading to allegations that they pertained to imported Partially Oriented Yarn (POY). The petitioners were accused of selling DTY under the guise of TY without paying excise duty. Consequently, they were directed to pay excise duty of TY amounting to Rs. 20 Lacs on March 19, 1997, which they did under protest. 2. Validity of the Refund Claim of Rs. 20 Lacs Paid Under Protest: On March 29, 2000, a show-cause notice was issued to the petitioners for the alleged removal of DTY, demanding excise duty of Rs. 1,40,21,719/-. The petitioners lodged a refund claim of Rs. 20 Lacs paid under protest, as there was no reference to this deposit in the show-cause notice. The Deputy Commissioner of Central Excise rejected the refund claim on June 13, 2000, citing the pending show-cause notice and lack of substantiating documents. The petitioners challenged this before the Commissioner of Central Excise (Appeals), who confirmed the demand and imposed a penalty. The Tribunal later set aside the Commissioner's order and allowed the appeal, leading to the petitioners filing for a refund of the redemption fine of Rs. 50,000/-. The Commissioner of Central Excise (Appeals) rejected this refund claim as time-barred. However, the Appellate Tribunal set aside this order, ruling that the refund claim was not hit by limitation. 3. Entitlement to Interest on the Delayed Refund of Rs. 20 Lacs: The petitioners requested the refund of Rs. 20 Lacs with interest. The respondents contended that while the Tribunal allowed the refund claim, it did not grant interest. The amount of Rs. 20 Lacs was refunded on February 4, 2004, but no interest was paid. The court examined Section 11BB of the Central Excise Act, which mandates interest on delayed refunds if the duty is not refunded within three months from the date of receipt of the application. The court referred to the decision in Commissioner of Customs (Preventive) Vs. Ghaziabad Ship Breakers Ltd., which held that any amount deposited during the pendency of an appeal is treated as a pre-deposit and should be refunded with interest if delayed. The Apex Court in Commissioner of Central Excise, Hyderabad Vs. I.T.C. Ltd. held that interest on delayed refund of a pre-deposit is payable from the date of the final disposal of the dispute. The court concluded that the refund of Rs. 20 Lacs, treated as a pre-deposit, was delayed beyond the prescribed period, warranting interest. The petitioners were entitled to interest from September 3, 2001 (the date of the Tribunal's order) to February 4, 2004 (the date of refund). The respondents were directed to calculate and pay the interest within eight weeks. Conclusion: The petition was allowed, and the petitioners were held entitled to interest on the delayed refund of Rs. 20 Lacs for the period from September 3, 2001, to February 4, 2004. The respondents were ordered to calculate the interest and make the payment within eight weeks. The rule was made absolute to the extent above.
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