2019 (8) TMI 65 - AT - Central Excise

Interest on delayed refund in terms of Rule 7(5) of the Central Excise Rules 2002 - finalization of the provisional assessments - HELD THAT - If any amounts are to be refunded as per the order of finalization of provisional assessment the same should be refunded along with interest from the first day of the month succeeding the month for which such refund is determined till the date of the refund at a rate which is as prescribed as per the Notification issued under Section 11BB of Central Excise Act 1944 - The ground taken by Commissioner(Appeals) cannot be justified because here the adjudication proceedings are for finalization of provisional assessment which is a separate realm governed by Rule 7 of the Central Excise Rules. Interest is either by way of operation of contract or by way of operation of law. When it is by way of operation of law needs to be paid as per the provisions stated in law which in this case is Rule 7(5) - the three appeals need to be allowed to the extent of interest that needs to be determined under Rule 7(5) and paid to the appellants - appeal allowed.

Summary

Issues:
Appeal against Order-in-Appeal regarding refund and interest under Rule 7(5) of Central Excise Rules, 2002.

Analysis:
The judgment involves three appeals challenging Order-in-Appeal No.277-279/CE/APPL/NOIDA/11 passed by the Commissioner(Appeals), Customs & Central Excise, Noida. The Commissioner upheld the order of the Asstt. Commissioner granting refund of certain amounts during finalization of provisional assessments but denied the interest claimed by the appellants under Rule 7(5) of the Central Excise Rules, 2002. The main contention revolved around the interpretation of Rule 7(5) which mandates payment of interest on refunds determined after final assessment. The appellants argued that interest should be paid once the refund is allowed, as per the rule. The Revenue, on the other hand, supported the Commissioner's decision.

The Tribunal analyzed Rule 7(5) of the Central Excise Rules, 2002, which specifies the payment of interest on refunds post final assessment. The Tribunal noted that the rule mandates the payment of interest from the first day of the month succeeding the month for which the refund is determined till the date of refund. The Tribunal disagreed with the Commissioner's reasoning that interest was not applicable once the adjudicating authority denied the refund. The Tribunal clarified that the proceedings for finalization of provisional assessment, governed by Rule 7, are distinct from adjudication proceedings under Section 11B. Therefore, interest under Rule 7(5) should be paid as per law.

The Tribunal emphasized that interest under Rule 7(5) is a legal obligation and should be paid as per the provisions stated in the rule. It clarified that interest can be either by operation of contract or law, and in this case, it is by operation of law as per Rule 7(5). Consequently, the Tribunal allowed all three appeals to the extent that interest determined under Rule 7(5) should be paid to the appellants. Thus, the appeals were allowed, and interest under Rule 7(5) was granted to the appellants as per the legal mandate.

In conclusion, the judgment clarified the applicability of Rule 7(5) of the Central Excise Rules, 2002, in determining interest on refunds post final assessment. It highlighted the legal obligation to pay interest as per the rule and differentiated between proceedings for finalization of provisional assessment and adjudication proceedings under Section 11B. The Tribunal's decision emphasized the importance of adhering to legal provisions for the payment of interest on refunds, ensuring compliance with the law in such matters.