2016 (12) TMI 26 - AT - Central Excise

Interest on delayed refund of pre-deposit - The Commissioner (Appeals) held that the date for interest calculation starts after three months from the date of refund application. The said three months cannot start from the date of original application as it was not in the prescribed manner supported by documentary evidence - the appellants filed claim for interest after six years of sanction of refund - time bar - Held that - the appellants deposited an amount of 2 crores during the course of investigation itself. Apparently the same is considered all throughout as a deposited amount not a regular payment of duty. We note that the Hon ble Supreme Court in CCE Hyderabad vs. I.T.C. Limited 2004 (12) TMI 90 - SUPREME COURT OF INDIA held that in terms of draft Circular by the Board interest shall be payable for delay beyond of three months after final disposal of dispute between the parties. The contents of the Circular was ordered to be part of the order of the court. In this connection we note that the Board vide Circular dated 08/12/2004 held that such refund should be disposed of within three months from the date of the order of the Tribunal/Court etc. failing which due interest shall be payable - We find that the Original Authority categorically held that the amount of 2 crores is a pre-deposit amount which was paid by the appellant at the investigation stage and the same has been considered as pre-deposit specifically vide interim order dated 06/07/2000 passed by the Tribunal. The appellants are entitled for interest for the period beyond three months from the date of final order of the Tribunal dated 04/04/2001 till sanction of the amount to the appellant. Such interest is automatic and no separate claim is mandated for the same. As such we find the impugned order is not legally sustainable with reference to rejection of interest - appeal allowed - decided in favor of appellant-assessee.

Summary

Issues:
1. Entitlement to interest on delayed payment of refund.
2. Interpretation of Circular regarding payment of interest on delayed refunds.
3. Pre-deposit amount considered for duty payment.

Analysis:

1. The appellants, engaged in the manufacture of yarn and fabric, were investigated for short payment of duty in 1998. They deposited an amount of ?2 crores during the investigation. The Original Authority confirmed duty demand and used the deposited amount towards duty. However, the Tribunal later set aside the original order, directing the Department to return the deposited amount without delay. The appellants applied for a refund on 03/5/2001, which was sanctioned on 26/3/2002. Subsequently, they claimed interest for delayed payment of refund in 2008, which was rejected by the Commissioner (Appeals) stating that the interest calculation starts after three months from the date of refund application, not from the original application. The appellants argued that they are entitled to interest as the refund was delayed.

2. The Tribunal referred to a Circular by the Board stating that interest shall be payable for delays beyond three months after the final disposal of disputes. The Circular emphasized that refunds should be processed within three months from the Tribunal's order, failing which interest is payable. Citing a Supreme Court case and a decision by the Punjab & Haryana High Court, the Tribunal held that interest is due for the period after three months from the Tribunal's order until the actual sanction of the refund. The Tribunal concluded that the appellants are entitled to interest automatically without the need for a separate claim, setting aside the rejection of interest by the Commissioner (Appeals).

3. The Tribunal noted that the ?2 crores deposited by the appellants was considered a pre-deposit amount, not a regular payment of duty, as per an interim order by the Tribunal. This distinction was crucial in determining the entitlement to interest on the delayed refund payment. The Tribunal's decision was based on legal precedents and the interpretation of relevant Circulars and court judgments, ensuring that the appellants received their rightful interest on the delayed refund amount.