2013 (11) TMI 534 - HC - Central Excise

Payment of Interest till Refund Earlier Interest not provided in any statutory provisions on 26-5-1995 Section 11BB of the central excise act was enacted Held that - Interest can be awarded on the money withheld by a party on the basis of either statutory provision of law or by virtue of contractual liability of payment of interest - In other case, the Court may award interest as damages to the aggrieved party on account of illegal retention of money by the party withholding the money - So far as rate of interest is concerned, it is governed by the statutory provision in civil suits when interest claimed is neither as per statutory provision for interest, nor is a contractual interest. The petitioner deposited the amount in compliance of the order of this Court and to take benefit of the interim order, it cannot be said that the respondents recovered the amount illegally - This situation is peculiar in the facts of the case and may not be applied in all cases, where there may be absolutely illegal demand raised by the Department without any authority of law, which is found to be absolutely illegal by the court of law when challenged in the court of law - the petitioner succeeded in the first round of litigation before the learned Single Judge, but lost the battle in the second round before the Division Bench and ultimately succeeded in third round before the Supreme Court thus, it cannot be said that the respondents had no legal right to raise the demand at the time when the position of law was not very clear because of the reason that ultimately the view taken by the respondent-Department was found to be erroneous - Petitioner is entitled to interest from the date of the judgment of Hon ble Supreme Court dated 22-1-1997 till the refund of the amount of Rs. 50 lacs on 12-1-1999 - for quantification the petitioner is entitled to interest @ 15% over Rs. 50 lacs from 22-1-1997 to 12-1-1999 Decided in favour of Petitioner.

Summary

Issues Involved:
1. Classification and levy of duty on corrugated sheets.
2. Demand for differential duties under Tariff Item No. 68.
3. Interim orders and deposits made by the petitioner.
4. Entitlement to interest on the refunded amount.
5. Determination of the rate and period of interest.

Detailed Analysis:

1. Classification and Levy of Duty on Corrugated Sheets:
The petitioner initially classified corrugated sheets under Tariff Item No. 25, which was later amended to Tariff Item No. 26(A)(A) effective from 1st August 1983. The classification list was approved by the Assistant Collector, Central Excise on 31st July 1984. However, the Collector of Central Excise, Patna, directed an appeal against this classification, leading to the Collector (Appeals), Kolkata, reclassifying the corrugated sheets under Tariff Item No. 68 for the period from 4th August 1983 to 16th March 1985. This reclassification resulted in a demand for differential duties.

2. Demand for Differential Duties under Tariff Item No. 68:
The Collector (Appeals) directed the petitioner to pay duty on plain sheets during the period from 1st August 1983 and thereafter on corrugated sheets under Tariff Item No. 68. Consequently, the authorities raised a demand for differential duties under Tariff Item No. 68.

3. Interim Orders and Deposits Made by the Petitioner:
The petitioner challenged the reclassification and demand through a writ petition (CWJC No. 219/1986R), resulting in an interim order by the Patna High Court on 30th April 1986, directing the petitioner to deposit Rs. 1 crore. The Supreme Court later modified this order, reducing the deposit to Rs. 50 lakhs in two installments and requiring a bank guarantee for the remaining Rs. 50 lakhs.

4. Entitlement to Interest on the Refunded Amount:
After the petitioner's writ petition was allowed on 19th August 1988, the Union of India appealed, leading to a stay on the judgment with a condition that the deposited amount would be refunded with 15% interest if the appeal failed. The Supreme Court eventually quashed the reclassification and demand notices on 22nd January 1997, leading the petitioner to seek a refund of the deposited amount with interest.

5. Determination of the Rate and Period of Interest:
The petitioner argued for interest at 15% per annum from the date of deposit until the refund, citing various judicial precedents. The Revenue contended that no statutory provision mandated interest and that any interest should be calculated from the date of the Supreme Court's decision. The Court concluded that the petitioner was entitled to interest from 22nd January 1997 (the date of the Supreme Court's judgment) until 12th January 1999 (the date of refund), at a rate of 15% per annum, based on the interim order in L.P.A. No. 71/1988R.

Conclusion:
The Court allowed the writ petition, directing the respondents to pay interest at 15% per annum on the deposited amount of Rs. 50 lakhs from 22nd January 1997 to 12th January 1999. The respondents were instructed to make this payment within four weeks from the receipt of the order.