2008 (7) TMI 324 - AT - Central Excise

Interest on delayed refund of Cenvat credit - Commissioner (Appeals) has rejected the claim for interest on the ground that the refund of Cenvat credit as per the provisions of Rule 5 is not covered by Section 11B and therefore interest is not admissible held that intention of legislature was to apply all provisions of Section 11B for the refund of Cenvat credit also - arguments of revenue that Section 11B and Section 11BB are not applicable for claim of interest for delayed refund of Cenvat credit amount, not acceptable - held that appellants are eligible for interest on delayed refund of Cenvat credit appeal allowed

Summary

Issues: Admissibility of interest on Cenvat credit refunded under Rule 5 of Cenvat Credit Rules.

Analysis:
1. The common issue in the nine appeals before the Appellate Tribunal CESTAT AHMEDABAD was the admissibility of interest on Cenvat credit refunded under Rule 5 of Cenvat Credit Rules. The Commissioner (Appeals) had rejected the claim for interest, stating that the refund of Cenvat credit under Rule 5 is not covered by Section 11B, hence interest is not admissible.

2. The appellant argued that Section 11B, specifically proviso (c) to Sub-section (2), covers the refund of credit of duty paid on excisable goods used as inputs, indicating the legislature's intent to apply all provisions of Section 11B for Cenvat credit refunds. The appellant cited various decisions in support. The Tribunal found that Section 11B and Section 11BB are indeed applicable, making the appellants entitled to interest. CBE&C Circular No.130/41/95-CX also supported the payment of interest under Section 11BB for duty paid on excisable goods used as input. The Tribunal referred to a decision where interest was held payable on refunded input duty credited beyond the prescribed period under Section 11BB.

3. The Commissioner (Appeals) rejected the appellant's claim based on a misunderstanding of the essential prerequisites of Section 11B. The Tribunal found the cited decision applicable to the present issue. The Tribunal disagreed with the Revenue's argument that Section 11B and Section 11BB are not applicable for delayed Cenvat credit refunds, citing irrelevant judgments that did not support the Revenue's position.

4. The Tribunal concluded that the appellants were indeed eligible for interest on delayed Cenvat credit refunds, as claimed by the appellant. Consequently, the appeals were allowed, providing consequential relief to the appellant. The Tribunal's decision clarified the applicability of Section 11B and Section 11BB to Cenvat credit refunds, ensuring the appellants' entitlement to interest in such cases.