2008 (1) TMI 82 - AT - Central Excise

Refund filed on 13.1.03 - Interest on delayed refund of credit only just before the elapse of 3 months, they issued a SCN dated 9-4-03 asking for certain original documents - stated that all the information which are relevant for sanctioning the claim has been filed along with the original application - even though the assessee had taken credit, they had not utilized it - it cannot be said that the amount was available with assessee and no interest had to be paid Interset will be payable

Summary

Issues:
- Refund claim of Cenvat credit for exported goods.
- Granting of interest on delayed refund.
- Interpretation of Rule 5 of Cenvat Credit Rules, 2002.
- Discrepancies in refund claim submission.
- Compliance with natural justice principles.
- Possession of Cenvat credit by the assessee.
- Applicability of interest payment on delayed refunds.
- Comparison with similar cases.

Analysis:
1. Refund Claim of Cenvat Credit for Exported Goods:
The case involved a respondent claiming a refund of Cenvat credit for unutilized credit due to exporting ready-made garments. The respondent filed a refund claim under Rule 5 of Cenvat Credit Rules, 2002. Initially, the Basic Excise Duty was sanctioned, but the Additional Excise Duty was rejected. Later, the AED portion was granted based on the Board's order and a Tribunal decision. The issue revolved around the respondent's eligibility for interest on the delayed refund.

2. Granting of Interest on Delayed Refund:
The Commissioner (Appeals) allowed the respondent's appeal and ordered payment of interest based on legal positions and decisions. The Revenue contested this decision, citing discrepancies in documents, delays in compliance by the assessee, and the contention that interest was not payable due to the possession of Cenvat credit by the respondent. However, the Tribunal found that interest should be paid if the competent authority delays refund sanction, as per Section 11BB.

3. Interpretation of Rule 5 of Cenvat Credit Rules, 2002:
The Tribunal rejected the Revenue's argument that the refund under Rule 5 of Cenvat Credit Rules is different from Section 11B refund. It clarified that the duty paid remains with the Government until credit utilization by the respondent. The need for filing a refund claim under Rule 5 indicates that only upon sanction by the competent authority, the refund becomes effective, justifying interest payment on delays.

4. Compliance with Natural Justice Principles:
The Tribunal criticized the Revenue's approach of issuing a show cause notice just before the three-month deadline for refund decision. It emphasized the importance of expeditious verification by the Department once all relevant information is provided by the assessee to avoid delays in refund processing.

5. Possession of Cenvat Credit by the Assessee:
The Revenue argued that since the Cenvat credit was in the possession of the respondent, no interest should be paid on the delayed refund. However, the Tribunal clarified that until credit utilization, the duty amount remains with the Government, necessitating interest payment for delays in refund sanction.

6. Applicability of Interest Payment on Delayed Refunds:
The Tribunal upheld the Commissioner's decision to grant interest on the delayed refund, emphasizing that interest becomes payable if the competent authority delays sanction beyond three months from the refund application date, as per Section 11BB.

7. Comparison with Similar Cases:
The Tribunal referenced a similar case where interest on delayed refund of Cenvat credit was disallowed. However, it distinguished the present case, emphasizing the necessity of interest payment when the competent authority delays refund sanction, regardless of the possession of unutilized credit by the assessee.

In conclusion, the Tribunal rejected the Revenue's appeal, affirming the Commissioner's decision to grant interest on the delayed refund of Cenvat credit, highlighting the importance of timely refund processing and the obligation to pay interest for delays as per legal provisions.