2007 (7) TMI 120 - AT - Central Excise

Interest on refund Appellant demand for interest on refund on the ground that the revenue authority illegally without issue an SCN, forced the appellant to pay duty and amount deposited by appellant Interest allowed from the date of payment till the date of refund u/s 11BB

Summary

Issues:
1. Entitlement to benefit of exemption Notification No. 1/93-C.E.
2. Payment of duty before the issuance of a show cause notice.
3. Refund claim and interest on illegally collected amount.

Entitlement to benefit of exemption Notification No. 1/93-C.E.:
The appellants were availing the benefit of exemption under Notification No. 1/93-C.E. The Central Excise officers informed them that they were not entitled to the benefit of Small Scale Industries (SSI) Notification as their unit was registered with the Directorate General of Technical Development (DGTD). The appellants were compelled to pay an amount of Rs. 6,25,000 on 9-5-1994. The Deputy Commissioner confirmed the amount, which was later upheld by the Commissioner (Appeals). However, the CEGAT allowed the appeals in its order dated 11-10-2002. Subsequently, a refund claim was filed by the appellants, which was partially sanctioned without any interest. The issue revolved around the appellants' entitlement to the exemption and the subsequent refund claim.

Payment of duty before the issuance of a show cause notice:
The learned Advocate for the appellants argued that the Revenue Authorities forced the appellants to make the payment of Rs. 6,25,000 illegally even before the issuance of a show cause notice. The Tribunal's order dated 11-10-2002 vindicated the stand of the appellant, stating that the collection made without the authority of law was illegal. The Advocate cited various case laws to support the argument that interest should be granted on amounts retained by the Department illegally. The learned JDR, on the other hand, contended that the refund was paid promptly after the CEGAT's order, and hence, the decision of the lower authorities was correct.

Refund claim and interest on illegally collected amount:
The Tribunal, after careful consideration of the case records, found that the duty was collected illegally from the appellants before the issuance of a show cause notice. The Tribunal referred to various case laws to support the decision to grant interest on the illegally collected amount. The Tribunal held that interest should be paid from the date of payment of duty by the appellant to the department till the date of payment of refund at the rate specified for interest on refund under Section 11BB during the relevant periods. Consequently, the appeal was allowed by setting aside the impugned order, emphasizing the illegality of the collection and the entitlement to interest on the refunded amount.

This detailed analysis of the judgment highlights the issues of entitlement to exemption, payment of duty before due process, and the subsequent refund claim with interest on illegally collected amounts, providing a comprehensive understanding of the legal proceedings and the final decision of the Appellate Tribunal CESTAT, Bangalore.