2009 (2) TMI 171 - AT - Central Excise

Interest on Delayed Refund Cash Refund of Cenvat Credit - The eligibility of cash refund of the amounts lying in Cenvat credit is not in dispute - . The limited issue is whether the interest is payable for the delay in paying refund - Held that - Cenvat credit lying unutilized in the assessee s account cannot be treated like saving bank account or fixed deposit account in a bank. Till the debit is made in the Cenvat account it is not a case of duty payment by the appellant. Only in cases of refund of duty paid the question of interest will arise. Even during the period where the assessees were required to maintain a PLA in which cash credited by them is taken as credit the said amounts were not earning any interest. Under these circumstances the question of granting any interest on refund in cash of unutilized Cenvat credit does not arise.

Summary

Issues:
1. Eligibility for interest on delayed refund payment.

Analysis:
The judgment by the Appellate Tribunal CESTAT, New Delhi dealt with two appeals by the same appellant involving a common issue, which were addressed in a single order. The appellant had filed refund claims following a Tribunal order, which were initially rejected by the original authority but later allowed by the Commissioner (Appeals). The appellant sought interest for the delayed refund payments, claiming that they were eligible due to the delay in receiving the refund after filing the claims.

The appellant argued that they were entitled to interest on the refund amounts as they had become eligible for exemption due to expansion exceeding the prescribed limit, rendering the Cenvat credit unusable. The Department, however, contended that the refund claims were paid within three months of submission, and as the refunds were in the form of Cenvat credit, no interest was payable. The Tribunal considered both sides' submissions and noted that the eligibility for cash refund of unutilized Cenvat credit was not disputed. The key issue was whether interest was payable for the delay in refund payment.

The Tribunal clarified that unutilized Cenvat credit in the appellant's account could not be equated to a bank account earning interest. Interest on refund payments typically arises in cases of duty paid refunds. The Tribunal highlighted that the appellant's Cenvat account did not involve duty payment until the debit was made, and the unutilized credit did not accrue interest. Even when the appellant maintained a PLA for cash credits, those amounts did not earn interest. Therefore, the Tribunal concluded that there was no basis for granting interest on cash refunds of unutilized Cenvat credit. Consequently, the Tribunal found no fault in the Commissioner (Appeals)'s order and rejected the appeals.

In summary, the judgment clarified the distinction between duty payment refunds and refunds of unutilized Cenvat credit, emphasizing that interest on delayed refund payments does not apply to cash refunds of unutilized credit. The decision underscored that unutilized Cenvat credit does not generate interest akin to a bank account, thus denying the appellant's claim for interest on the delayed refund payments.