2008 (8) TMI 319 - AT - Central Excise

Refund of interest paid wrongly - If the appellant is entitled for refund of interest on merits in view of the Rajasthan High Court decision holding that Rule 8 of Central Excise rule is ultra vires and the department is duty bound to refund the amount forthwith. - anywhere any amount wrongly collected should be refunded and cannot be rejected on the ground it is not provided under statutory provisions of refund. - denial of refund of interest paid on the ground that there is no provision to refund is not justified. Refund is allowed however the claim of interest on interest rejected.

Summary

Issues:
Refund of excess interest paid under Rule 8 of Central Excise Rules based on a High Court decision, rejection of refund claim by lower authority, applicability of general limitation period for refund, denial of refund due to lack of specific provision under Section 11B.

Analysis:
The appeal was filed against the Order-in-Appeal No. 45/2008-CE dated 28-2-2008 passed by the Commissioner of Central Excise (Appeals-I) Bangalore. The appellant had paid interest at the rate of 2% and Rs.1000/- per day for delayed payment of duty. They sought a refund of interest in excess of 25 based on a decision of the Rajasthan High Court. The lower authority rejected the refund claim, stating the decision was not applicable to their jurisdiction. The Commissioner (Appeals) acknowledged the appellant's entitlement to the refund on merit but upheld the rejection citing the absence of a provision for refund under Section 11B. The Commissioner also questioned the time limit for refund, emphasizing the need for a legal basis for the refund.

Upon careful consideration, the Tribunal found the impugned order to be self-contradictory. The Tribunal referred to a previous case where it was held that any wrongly collected amount should be refunded, irrespective of specific statutory provisions. The Tribunal concluded that denying the refund solely due to the absence of a refund provision was unjustified. Therefore, the Tribunal ordered the refund of interest paid in excess of 2% as per the Rajasthan High Court's decision. The Tribunal rejected the appellant's request for interest on interest, citing insufficient grounds. The Tribunal also noted a similar case was under challenge before the High Court of Madras. Consequently, the Tribunal allowed the appeal for the refund of interest in excess of 2% in line with the Rajasthan High Court's ruling, providing consequential relief.

In conclusion, the Tribunal pronounced its decision on 26-8-2008, granting the appellant the refund of excess interest paid, while rejecting the claim for interest on interest. The judgment emphasized the obligation to refund wrongly collected amounts, even in the absence of specific statutory provisions, and highlighted the importance of legal basis for refund claims.