2016 (2) TMI 288 - AT - Central Excise

Demand of Interest - Refund by taking credit of the amount in their cenvat account and thereby taking a suo motto refund of pre-deposit - Held that - As per the appellate order dated 22.6.2007 the pre-deposit amount has to be refunded to the respondent. The act of the respondents in taking refund of the amount by crediting the amount in their cenvat credit account, is only a procedural lapse. After taking credit, the respondents have declared the same in their ER-1 returns of July, 2007 itself. Moreover, they sent a letter dated 22.2.2008 along with copy of appellate order and requested for permission to utilize the credit, besides their request to issue formal order of sanctioning refund. All these establish that there was no suppression or pre-meditated act to evade payment of duty. The right of the party to get refund of pre-deposit cannot be denied on account of a procedural lapse. The Assistant Commissioner in any case ought to have considered the letter dated 22.2.2008 as an application for refund. As the amount is payable/refundable to the respondents w.e.f.22.6.2007, do not find any ground to demand interest on the very same amount alleging that the respondents took credit irregularly. The impugned order calls for no interference. - Decided in favour of assessee

Issues Involved:
1. Liability to pay interest on suo moto credit of pre-deposit.
2. Requirement of an application for refund of pre-deposit.
3. Procedural lapses and their impact on the right to refund.
4. Interpretation of relevant legal provisions and circulars regarding refund and interest.

Issue-wise Detailed Analysis:

1. Liability to Pay Interest on Suo Moto Credit of Pre-deposit:
The Revenue contended that the respondents were liable to pay interest from the date they took suo moto credit of Rs. 10,91,728/- until the date the refund was sanctioned. The respondents argued that they were entitled to the refund from the date of the Order-in-Appeal dated 22.6.2007, and no interest was due as there was no recovery pending.

2. Requirement of an Application for Refund of Pre-deposit:
The respondents took credit of Rs. 10,91,728/- in their Cenvat credit account in June 2007 after the Order-in-Appeal dated 22.6.2007 allowed their appeal with consequential relief. They informed the department via a letter dated 22.2.2008, referencing the Board's Circular No.275/37/2000-Cx.8A dated 2.1.2002, which stated that no application was required for the refund of pre-deposit. The Commissioner (Appeals) initially confirmed the demand but reduced the penalty, emphasizing that an order sanctioning the refund was necessary.

3. Procedural Lapses and Their Impact on the Right to Refund:
The respondents' act of taking credit in their Cenvat account without a formal order was considered a procedural lapse. However, the Tribunal found that this did not amount to suppression or an attempt to evade duty. The letter dated 22.2.2008, along with the appellate order, should have been treated as an application for refund. The Tribunal held that the right to refund could not be denied due to procedural lapses.

4. Interpretation of Relevant Legal Provisions and Circulars Regarding Refund and Interest:
The Tribunal referred to the Hon'ble Apex Court's decision in CCE, Hyderabad vs. I.T.C. Ltd., which held that interest on delayed refunds of pre-deposit is payable from three months after the final disposal of the dispute. The Tribunal also noted that, as per various judgments and Board circulars, an application for refund was not required for pre-deposit refunds. Section 35FF, introduced on 10.5.2008, mandated the refund of pre-deposit within three months from the communication of the appellate order, failing which interest would be payable.

Conclusion:
The Tribunal concluded that the respondents were entitled to the refund of the pre-deposit amount from 22.6.2007 and that the procedural lapse of taking credit in their Cenvat account did not warrant the imposition of interest. The appeal filed by the Revenue was dismissed, and the cross objections were disposed of accordingly.

Judgment:
The appeal by the Revenue was dismissed, and the cross objections were disposed of. The Tribunal held that the respondents were not liable to pay interest on the suo moto credit of the pre-deposit amount. The right to refund could not be denied due to procedural lapses, and the respondents' letter dated 22.2.2008 should have been considered as an application for refund.

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