2007 (12) TMI 204 - AT - Central Excise

Interest payable on delayed refund - In pursuance of the audit objection, the appellant paid the disputed amount on 24-11-2001; claimed refund on 7-1-2002; the same was rejected by the original authority; Commissioner (Appeals) vide his order dated 29-4-05 allowed the appeal - When, the Commissioner (Appeals) has set aside the order of the original authority and allowed the refund claim the interest liability should have been determined with reference to the date of the claim that is 7-1-2002

Summary

Issues:
1. Disputed duty refund and interest payment eligibility.

Analysis:
The appeal before the Appellate Tribunal CESTAT, Ahmedabad, involved a dispute regarding the payment of interest on a refunded amount of Rs. 1,66,720. The appellant paid the disputed duty amount in response to an audit objection, claimed a refund, which was initially rejected but later allowed by the Commissioner (Appeals) in an order dated 29-4-05. The central issue revolved around whether interest was payable on the refunded amount and the applicable starting date for calculating such interest.

The Department contended that since the refund was sanctioned within three months of the Commissioner (Appeals) order, no interest was payable. On the other hand, the appellants argued that their refund claim, filed on 7-1-2002, was found eligible by the Commissioner (Appeals) independently of their original claim, making them eligible for interest from the claim date. The crux of the matter lay in interpreting Section 11BB of the Central Excise Act to determine the correct starting point for interest calculation.

The Tribunal noted that the Commissioner (Appeals) decision essentially validated the refund claim made on 7-1-2002, and since the original authority's decision was set aside, the interest liability should be pegged to the claim date as per Section 11BB. Consequently, the appeal was allowed, granting the appellants the right to interest payment on the refunded amount, with the interest becoming payable three months from the date of the refund claim.

In conclusion, the Tribunal's judgment clarified the eligibility criteria for interest payment on refunded duty amounts, emphasizing the importance of the claim date in such determinations and aligning the decision with the provisions of the Central Excise Act.