2015 (2) TMI 302 - AT - Central Excise

Interest claim on refund - Commissioner granted interest on refund claim from belated date - Held that - Appellant on 26.11.1997 had paid an amount of ₹ 10.00 Lakhs under protest during investigation of the matter against them, as the Departmental officer was of the view that the appellant s activity of filling hydrogen gas from pipeline into retail cylinder amounts to manufacture, subsequently, the additional Commissioner vide order dated 31.10.2002 confirmed the duty demand of ₹ 17.59 Lakhs against appellant holding that their activity amounts to manufacture and specifically appropriated the amount of ₹ 10.00 Lakhs already paid by them. Thus, once the Addl. Commissioner held that the appellant activity amounts to manufacture and confirmed the duty demand of ₹ 17.59 Lkhs against them and appropriated ₹ 10.00 Lakhs as payment towards their assessed duty liability, the ₹ 10.00 Lakhs earlier paid by them becomes the payment of duty by the appellant towards assessed duty liability and ceased to be an amount paid on ad-hoc basis. The refund claim of the amount of ₹ 10.00 Lakhs arose, when the Addl. Commissioner s order was set aside by the Commissioner (Appeals) vide order in appeal dated 20th November, 2003, who held that the appellant s activity does not amount to manufacture and set aside the Addl. Commissioner s order dated 31.10.2002. The refund application was filed only on 06.07.2004. In terms of Section 11BB of the Central Excise Act, the interest liability of the Department for delay in payment of refund under Section 11B arises, only when there is delay beyond 3 months from the date of filing of the refund application. Since in this case refund application had been made on 06.07.2004, the interest liability would start from 07.10.2004 till the refund was paid to the appellant. The Commissioner (Appeals), however, has granted interest even from much earlier period from 20th February, 2004, against which it is the department which should be aggrieved and not the appellant. - No merit in appeal - Decided against assessee.

Summary

Issues:
1. Whether the appellant's activity amounts to manufacture.
2. Whether the appellant is entitled to interest on the refund amount.
3. Whether the interest liability of the department arises from the date of filing the refund application.
4. Whether the appellant's refund claim was appropriately handled.

Analysis:

Issue 1:
The appellant was engaged in filling hydrogen gas into retail cylinders and clearing them without paying duty, claiming it did not amount to manufacture. The Department contended otherwise, leading to a demand for duty and penalties. The Addl. Commissioner confirmed the duty demand, but the Commissioner (Appeals) later ruled in favor of the appellant, stating their activity did not amount to manufacture. This decision made the appellant eligible for a refund of the duty paid.

Issue 2:
The appellant sought interest on the refund amount, arguing that the amount paid during investigation became refundable along with interest. The Department argued that once the amount was appropriated towards the duty liability, it converted into payment of Central Excise duty. The appellant's delay in filing the refund application was highlighted, and the interest liability was said to start from the date of filing the refund application, not from the date of payment.

Issue 3:
The Tribunal clarified that interest for delayed refund is payable under section 11 BB from the date of the expiry of the 3-month period from the date of the refund application, as per the Supreme Court's ruling. The appellant's reliance on other judgments was deemed inapplicable to the case at hand.

Issue 4:
The Tribunal found that the appellant's refund claim was appropriately handled, emphasizing the requirement for the appellant to file a refund application as per Section 11B. The interest liability of the Department was determined from the date of filing the refund application, and the Commissioner (Appeals) granting interest from an earlier date was considered a matter for the Department to address, not the appellant.

In conclusion, the Tribunal dismissed the appeal, citing the Supreme Court's precedent on interest for delayed refunds and finding no merit in the appellant's arguments based on other judgments.