2017 (2) TMI 617 - AT - Central Excise

Interest on the delayed payment of rebate claims - export of goods - whether the appellant are eligible for interest from three months after the date of sanctioning the rebate for the reason that the appropriation was illegal and against the provisions of law? - Held that - the assessee is entitled to interest for delay in payment of sanctioned rebate on account of the sanctioned rebate being adjusted to pending arrears which have not reached finality - The appropriation of the amount, prior to the demand attaining its finality, and also during the pendency of the stay application is highly harsh on the assessee. The appellant is eligible for interest after three months from the date of filing the rebate claim till the actual payment of refund - appeal allowed - decided in favor of appellant.

Summary

Issues Involved:
1. Denial of interest on delayed payment of rebate claims.
2. Appropriation of rebate claims towards duty, interest, and penalty.

Detailed Analysis:

1. Denial of Interest on Delayed Payment of Rebate Claims:
The appellants, engaged in the manufacture of paper and paper boards, filed rebate claims under Rule 18 of the Central Excise Rules, 2002, for the duty paid on exported goods. The primary issue was the denial of interest on the delayed payment of these rebate claims. The rebate claims were sanctioned partly in cash and partly by credit in the CENVAT account. However, the amounts sanctioned in cash were appropriated towards duty confirmed by previous orders. The appellants contended they were eligible for interest from three months after the date of sanctioning the rebate, arguing that the appropriation was illegal and against the provisions of law. They cited several judicial precedents, including Ranbaxy Laboratories Ltd. Vs Union of India, to support their claim that mere passing of a rebate order is insufficient; it must result in the actual refund of the amount. The Tribunal agreed with the appellants, stating that the rebate sanctioning authority appropriated the sums due to the appellant by invoking Section 11 of the Central Excise Act, 1944, even before the said demand attained finality. The Tribunal held that the appellant is entitled to interest for delayed payment under Section 11B of the Act.

2. Appropriation of Rebate Claims Towards Duty, Interest, and Penalty:
The rebate sanctioning authority adjusted a sum of Rs.66,37,160/- from the refund amount sanctioned in cash towards the duty, interest, and penalty confirmed under previous orders. The appellant was given a cheque for the balance amount after appropriation. The appellant filed appeals against these orders, which were pending before the Commissioner (Appeals) along with stay applications at the time of appropriation. The Commissioner (Appeals) later set aside the duty, interest, and penalty confirmed by the previous orders and directed the payment of the entire rebate claim along with interest. However, interest was granted only from the date on which the duty, interest, and penalty were set aside. The Tribunal noted that the appropriation occurred before the demand attained finality and during the pendency of the appeal and stay application. The Tribunal cited various judicial precedents, including PML Industries Ltd. Vs Commissioner, which held that recovery of duty without a stay order is illegal. The Tribunal concluded that the appropriation was harsh and not justified, as the delay in disposing of the stay application was not due to any intentional act by the appellant. The Tribunal held that the appellant is eligible for interest after three months from the date of filing the rebate claim until the actual payment of the refund.

Conclusion:
The Tribunal set aside the impugned order to the extent of granting interest from 21.03.2014 and held that the appellant is eligible for interest after three months from the date of filing the rebate claim. The appeals were allowed with consequential reliefs, if any. The judgment emphasizes the importance of timely refund and interest on delayed payments, especially when appropriations are made without finality of demands.