2019 (10) TMI 955 - AT - Central Excise

Interest on delayed refund - wrongful grant of refund - time limitation - unjust enrichment - duty was paid under protest - HELD THAT - The appellant/assessee has not charged duty from the buyers of their goods, nor issued any debit notes subsequently nor have issued any supplementary bill. Thus, there is no way by which the appellant could have collected any amount subsequently. Further, it is an established legal principle that where the duty is paid under protest, there is no time limit for claim of refund - Further, in terms of instructions of CBEC dated 2.2.2002, the Adjudicating Authority was bound to refund the amount of duty deposited by the appellant under protest, which was in the nature of pre-deposit under Section 35 F. Duty paid under protest, ipso facto becomes pre-deposit under Section 35 F, on filing of appeal. Thus, the appellant is entitled to interest on refund from the date of filing the appeal (when such deposit under protest became pre-deposit under Section 35 F) till the date of grant of refund - appeal allowed - decided in favor of appellant.

Summary

Issues Involved:
1. Grant of interest on delayed refund.
2. Refund being barred by limitation.
3. Refund being hit by unjust enrichment.

Issue-wise Detailed Analysis:

1. Grant of interest on delayed refund:

The appellant, Herbicides India Ltd., filed an appeal against the order rejecting their claim for interest on the delayed refund. The Commissioner (Appeals) had held that since the refund was granted within three months from the date of application, interest was not payable under Section 11 BB of the Central Excise Act. The appellant argued that they paid duty under protest due to a classification dispute and that the duty paid should be treated as a pre-deposit under Section 35 F, entitling them to interest from the date of filing the appeal. The Tribunal agreed with the appellant, stating that duty paid under protest becomes a pre-deposit upon filing an appeal and directed the Adjudicating Authority to grant interest within 45 days.

2. Refund being barred by limitation:

The Department contended that the refund claim was time-barred as it was filed more than one year after the relevant date, which was the date of the order of the Commissioner (Appeals) dated 24.06.2005. The appellant countered that they paid duty under protest and continued to face demands from the Department even after the favorable order, making it impractical to claim a refund earlier. The Tribunal found that since the duty was paid under protest, there was no time limit for claiming the refund, thus rejecting the Department's argument on the limitation.

3. Refund being hit by unjust enrichment:

The Department argued that the appellant should have provided documentary evidence to prove that the burden of duty was not passed on to any other person. The appellant provided various documents, including invoices, balance sheets, Chartered Accountant’s Certificate, and affidavits, to show that they did not charge duty from their buyers and did not issue supplementary invoices or debit notes. The Tribunal found that the appellant had sufficiently demonstrated that the burden of duty was not passed on, thus the refund was not hit by unjust enrichment.

Conclusion:

The Tribunal allowed the appeal, set aside the impugned order-in-appeal, and directed the Adjudicating Authority to grant interest on the refund amount within 45 days. The Tribunal emphasized that duty paid under protest becomes a pre-deposit upon filing an appeal, entitling the appellant to interest from the date of the appeal filing to the date of refund grant.