2018 (6) TMI 582 - AT - Central Excise

Interest on refund of pre-deposit - penalty for self credit of education cess and higher education cess denied - Held that - The appellant has paid the said amount of penalty to file the appeal before the ld. Commissioner (A), therefore, the same is to be treated as pre deposit as in the case of J.M. Baxi 2010 (12) TMI 995 - GUJARAT HIGH COURT , as it is the amount of pre deposit - On the amount of pre deposit, the provisions of Section 11B of the Central Excise Act, 1944, are applicable. The assessee is entitled to interest on the refund of the pre deposit amount of penalty - appeal dismissed - decided against Revenue.

Summary

Issues:
1. Entitlement of the assessee to claim self-credit of education cess and higher education cess.
2. Appropriation of refund amount against pending demand.
3. Entitlement of interest on refund of penalty amount.

Analysis:

Issue 1: Entitlement of the assessee to claim self-credit of education cess and higher education cess
The case involved the assessee located in Jammu & Kashmir availing exemption under Notification 56/2002-CE. Initially, the assessee claimed self-credit of education cess and higher education cess, which was later disputed by the Revenue. The proceedings resulted in a demand being confirmed against the assessee, who subsequently paid the amount along with interest and penalty. The appeal before the Commissioner (A) led to the dropping of the penalty against the assessee, who then filed a refund claim for the penalty amount. The Tribunal held that the assessee was entitled to the refund claim as no demand was pending against them, setting aside the rejection of the refund claim.

Issue 2: Appropriation of refund amount against pending demand
The assessee had filed a refund claim for a specific amount, part of which was appropriated against another pending demand. The Tribunal ruled in favor of the assessee, stating that as no demand was outstanding against them, the refund amount could not be appropriated. The order rejecting the refund claim was set aside, and the refund was allowed to the assessee.

Issue 3: Entitlement of interest on refund of penalty amount
The Revenue contested the entitlement of the assessee to claim interest on the refund of the penalty amount, citing the absence of such provisions in Section 11B of the Central Excise Act, 1944. The Tribunal referred to various decisions but highlighted the relevance of CBEC Circular No. 802/35/2004-CX and the decision in the case of Madura Coats Ltd. The Tribunal concluded that the penalty amount paid by the assessee to file the appeal should be treated as a pre-deposit, making the provisions of Section 11B applicable. Consequently, the assessee was entitled to interest on the refund of the pre-deposit penalty amount. The appeal filed by the Revenue was dismissed.

In conclusion, the Tribunal allowed the appeal filed by the assessee regarding the refund claim and dismissed the appeal filed by the Revenue concerning the entitlement to interest on the refund of the penalty amount.