2019 (6) TMI 507 - AT - Central Excise

Interest on delayed refunds - Refund of accumulated CENVAT credit - claim for interest for the period upto March 16, 2005 - HELD THAT - it has been held right up to the Hon ble Supreme Court that the insistence on the Department s part that Rasoi paid in cash from PLA the duty was illegal and that Rasoi was entitled to utilize the credit lying in its RG -23B Part II Register and could not be forced to pay the said duty in cash. The interest has been claimed for the period from the respective dates of payments of the said duty in cash vide TR-6 challans upto the date of its refund dated March 16, 2005 when the said duty paid was allowed to be credited back in the PLA - In the instant case we find that the duties were not payable by Rasoi in cash but it was permissible for it to utilize the credit balance in RG-23B Part II Register for paying the same. This legal position was settled in favour of Rasoi right upto the Hon ble Supreme Court. The said duties were paid in cash by making deposits vide TR-6 challans and then entered in PLA. The said duties were paid due to insistence on the Department s part who prevented Rasoi from utilizing the credit lying in RG-23B Part-II Register, although entitled to - the Department is bound to pay Rasoi interest, as has been correctly held by the Commissioner (Appeals). Interest on duties of ₹ 4.10 crores for the period from three months after the date of filing the refund application till the date of refund - HELD THAT - The undisputed facts are that the refund application was filed on January 19, 2006 and the period of three months expired on April 18, 2006, but, however, the refund was granted on December 24, 2009. Hence, as per Section 11BB of the Central Excise Act, the Department is liable to pay statutory interest from April 19, 2006 to December 23, 2009 - the Commissioner (Appeals) has correctly allowed the claim for interest for the period April 19, 2006 to December 23,2009 on the duty amount of ₹ 4.10 crores. Claim for interest on delayed payment of interest - HELD THAT - This issue is no more res integra. It has been held by the Hon ble Supreme Court in the case of COMMISSIONER OF INCOME TAX, GUJARAT VERSUS GUJARAT FLUORO CHEMICALS 2013 (10) TMI 117 - SUPREME COURT , that it is a misinterpretation of this case that the Revenue is obliged to pay interest on interest in the event of its failure to refund the interest payable within the statutory period and that in the said case, considering the inordinate delay in payment, the Hon ble Supreme Court had directed the Revenue to pay compensation for the same and not an interest on interest. Accordingly to the Hon ble Supreme Court it is only interest provided for under the statute which can be claimed by an assessee from the Revenue and no other interest on such statutory interest can be claimed - the Commissioner (Appeals) had rightly rejected the claim of Rasoi for interest on delayed payment of interest. Appeal allowed in part.

Summary

Issues Involved:
1. Legality of the Department's insistence on payment of duty in cash instead of utilizing Modvat credit.
2. Entitlement to interest on the duty paid in cash up to the date of refund.
3. Entitlement to interest on delayed refund of ?4.10 crores.
4. Claim for interest on delayed payment of interest.

Detailed Analysis:

1. Legality of the Department's insistence on payment of duty in cash instead of utilizing Modvat credit:
Rasoi Limited was a manufacturer of Vanaspati, which was exempted from duty between July 24, 1996, and February 28, 2003. During this period, Rasoi had accumulated unutilized Modvat credit. When duty was reintroduced on March 1, 2003, Rasoi wanted to use the accumulated credit but was not permitted by the Revenue, forcing Rasoi to pay ?4.46 crores in cash. The Hon'ble Calcutta High Court allowed Rasoi's writ petition, enabling it to utilize the accumulated credit. The Supreme Court dismissed the Revenue's SLP against this judgment, solidifying Rasoi's right to use the accumulated credit.

2. Entitlement to interest on the duty paid in cash up to the date of refund:
Rasoi claimed interest for the period up to March 16, 2005, on the duty of ?4.46 crores paid in cash. The Tribunal referenced the ONGC Limited case, where the Supreme Court allowed interest on amounts wrongfully withheld by the Department, and the Sandvik Asia Ltd. case, which recognized the principle of compensating for wrongfully withheld amounts. The Tribunal concluded that Rasoi was entitled to interest as the duty was paid due to the Department's insistence, which was later found illegal.

3. Entitlement to interest on delayed refund of ?4.10 crores:
Rasoi filed for a refund of ?4.10 crores on January 19, 2006, which was only granted on December 24, 2009. The Tribunal referred to the Ranbaxy Laboratories Ltd. case, where the Supreme Court held that interest under Section 11BB of the Central Excise Act is payable from three months after the date of the refund application. The Tribunal upheld the Commissioner (Appeals)'s order, granting interest from April 19, 2006, to December 23, 2009.

4. Claim for interest on delayed payment of interest:
Rasoi's claim for interest on delayed payment of interest was rejected by the Commissioner (Appeals) and upheld by the Tribunal. The Tribunal cited the Supreme Court's decision in Commissioner of Income Tax, Gujarat Vs. Gujarat Fluoro Chemicals, which clarified that statutory interest is the only interest payable and no interest on interest is allowed. The Tribunal also referenced the Madras High Court's decision in Commissioner of Customs (Exports), Chennai Vs VBC Industries Ltd., which set aside an order granting interest on interest, further supporting the rejection of Rasoi's claim.

Conclusion:
The Tribunal upheld the Commissioner (Appeals)'s order, granting interest on the duty paid in cash and on the delayed refund, but rejecting the claim for interest on delayed payment of interest. Both the appeals of the Revenue and Rasoi were dismissed, affirming the legality of the interest claims and the rejection of interest on interest.