2019 (8) TMI 251 - AT - Central Excise

Interest on delayed refund - Rule 7(5) of the Central Excise Rules - HELD THAT - A bare perusal of the aforesaid Rule 7(5) indicates that when the assessee is entitled to refund there shall be paid an interest on such refund at the rate specified by the Central Government by notification issued under section 11BB of the Act. Rule 7(5) is an independent provision relating to payment of interest in a case where an assessee is held entitled to a refund consequent to an order for final assessment when the duty determined under the final assessment is lesser than that determined under a provisional assessment. It is only the rate of interest that has to be specified by the Central Government by a Notification issued under section 11BB of the Act - the appellant was entitled for payment of interest at the rate specified in the Notification dated 12 September, 2003. It is not possible to sustain the view taken by the Commissioner (Appeals) - Appellants are held entitled to payment of interest at the rate specified in the notification from the first day of the month succeeding the month for which such refund was determined till the date of refund - Appeal allowed.

Summary

Issues:
- Appellant denied interest on refunded duty amount by Appellate Authority.
- Commissioner (Appeals) partly allowed the appeals but denied interest on delayed payment of refund.
- Dispute over the entitlement of interest under Rule 7(5) of Central Excise Rules.

Analysis:
1. The appeals were filed by the assessee challenging the orders passed by the Appellate Authority, where refund of duty was allowed but interest on the amount was denied. The appellant, engaged in manufacturing various products, had paid excess duty and sought a refund, which was partly granted by the Adjudicating Authority. However, interest under Rule 7(5) of the Central Excise Rules was not paid.

2. Appeals were made before the Commissioner (Appeals) who partly allowed them, stating that there was sufficient evidence to show that the burden of duty incidence had not been passed on. However, interest on delayed refund payment was denied. The appellant contended that interest should be paid as per the rate specified by the Central Government, citing a Division Bench order in a similar case.

3. The dispute centered on the payment of interest under Rule 7(5) of the Rules. The Commissioner (Appeals) linked the grant of interest to the provisions of Section 11B and Section 11BB of the Central Excise Act. However, Rule 7(5) is an independent provision related to the payment of interest on refund consequent to a final assessment order, not subject to Sections 11B and 11BB.

4. The Central Government had specified the rate of interest at 6% through a Notification. The Tribunal found that the appellant was entitled to interest as per the notification rate, contrary to the Commissioner (Appeals) view. Therefore, the part of the order denying interest under Rule 7(5) was set aside, and the appellant was held entitled to interest from the specified date till the refund date, to be paid promptly within two months of the order.

5. The judgment highlights the correct interpretation of Rule 7(5) of the Central Excise Rules, emphasizing the entitlement of interest on refunded duty amounts as per the rate specified by the Central Government, separate from the provisions of Sections 11B and 11BB of the Act.