2022 (2) TMI 551 - AT - Customs

Jurisdiction - rejection of refund claim - power of Commissioner (Appeals) to pass the order remanding the appeal to the Original Adjudicating Authority for reconsideration - entitlement for interest on the sanctioned amount of refund from the date of deposit of the said amount - Section 128 A (3) of the Customs Act, 1962 - HELD THAT - The perusal of both provisions of Section 128 A (3) of the Customs Act, 1962, makes it abundantly clear that the amendment in these provisions has specifically taken away the power of remand to anymore be exercised by Commissioner (Appeals) to remand the case back to the Adjudicating Authority by deleting the words, May refer the case back to adjudicating authority with such directions as he may think fit for a fresh adjudication . The necessary enactment has taken away the power of Commissioner (Appeals) to sent the matters back to the Original Authority for reconsideration as was held by Hon ble Apex Court in the case of HITENDRA VISHNU THAKUR VERSUS STATE OF MAHARASHTRA 1994 (7) TMI 343 - SUPREME COURT . Hon ble Apex Court has dealt with the need of amendment in Section 128 A(3) of Customs Act. While adjudicating the case of MIL INDIA LTD. VERSUS COMMISSIONER OF C. EX., NOIDA 2007 (3) TMI 8 - SUPREME COURT , it has been held by Hon ble Supreme Court that Under Section 35B any person aggrieved by the order of the Commissioner as an adjudicating authority is entitled to move the Tribunal in appeal. Section 35B indicates that the decision of order passed by the Commissioner (A) shall be treated as an order of an adjudicating authority. In the circumstances the High Court had erred in holding that the assessee was not entitled to agitate the question of dutiability in appeal before the Tribunal - The said decision was immediately taken into consideration by Hon ble Punjab and Haryana in the case of COMMISSIONER OF CUS., AMRITSAR VERSUS ENKAY (INDIA) RUBBER CO. PVT. LTD. 2007 (3) TMI 276 - HIGH COURT OF PUNJAB HARYANA AT CHANDIGARH wherein after applying the MIL decision the matter was sent back to the Commissioner (Appeals) for decision in accordance with the law. The question of adjudication is thus decided holding that the Commissioner (Appeals) was not at all entitled to, any more be empowered to remand the matter back to the adjudication authority on this score the order under challenge is liable to be set aside, with effect from 11.05.2001. Entitlement of interest on delayed refund - HELD THAT - The refund claim was filed by the appellant on 23.1.2020. The same has been sanctioned by the Department vide Order dated 29.7.2020. Apparently the refund was sanctioned beyond the period of three months as provided under section 11B of the Central Excise Act, 1944. Section 11BB of the Act provides for interest on delayed refund. It states that if any duty ordered to be refunded under sub-section (2) of section 11B is not refunded within three months from the date of receipt of the application, than the applicant shall be entitled to interest after the expiry of three months from the date of receipt of the application at such rate not below 5% and not exceeding 30% as may be notified by the Central Government in the Official Gazette - On-going through the provisions of both Income Tax Act, 1961 and Central Excise Act, 1944, the interest on delayed refund is payable after expiry of 3 months from the date of granting refund or from the date of communication of order of the appellate authority, which are parimateria. As the Hon ble Apex Court in SANDVIK ASIA LIMITED VERSUS COMMISSIONER OF INCOME-TAX AND OTHERS 2006 (1) TMI 55 - SUPREME COURT has answered the issue holding that the assessee is entitled to claim interest from the date of payment of initial amount till the date its refund. Therefore, it is held that the appellants are entitled to claim the interest on delayed refund from the date of deposit till its realization. The appellant was wrongly proposed with the duty demand of ₹ 10,88,180/- which was deposited by the appellant even prior to the proposal for said demand. The said demand was later set aside holding the appellant to be entitled to Zero Duty EPCG authorisation. The deposit, therefore, was nothing but the deposit under protest. Accordingly, the appellant is held entitled for the interest at the rate of 12% from the date of deposit of the said amount. Hence the question regarding interest also stands decided in favour of the appellant. Appeal allowed - decided in favor of appellant.

Summary

Issues Involved:
1. Competence of Commissioner (Appeals) to remand the appeal.
2. Entitlement of the appellant to interest on the sanctioned refund amount from the date of deposit.

Issue-wise Analysis:

1. Competence of Commissioner (Appeals) to Remand the Appeal:
The first issue to be addressed is whether the Commissioner (Appeals) had the authority to remand the appeal to the Original Adjudicating Authority for reconsideration. Section 128A(3) of the Customs Act, 1962, was amended by the Finance Act, 2001. The pre-amendment provision allowed the Commissioner (Appeals) to refer the case back to the adjudicating authority with directions for fresh adjudication. However, the post-amendment provision removed this power, stating that the Commissioner (Appeals) could only confirm, modify, or annul the decision or order appealed against. This amendment specifically took away the power of remand from the Commissioner (Appeals), as affirmed by the Hon’ble Apex Court in the case of MIL India Ltd. vs. CCE Noida. Consequently, the Commissioner (Appeals) was not competent to remand the matter back to the adjudicating authority, and the order under challenge is liable to be set aside on this ground.

2. Entitlement to Interest on the Sanctioned Refund Amount:
The second issue is whether the appellant is entitled to interest on the sanctioned refund amount from the date of deposit. The appellant had deposited ?10,88,180/- even before the issuance of the Show Cause Notice, and this amount was deposited under protest. The refund claim was filed on 23.01.2020, and the refund was sanctioned on 29.07.2020, beyond the period of three months as provided under Section 11B of the Central Excise Act, 1944. Section 11BB of the Act provides for interest on delayed refunds if the refund is not made within three months from the date of receipt of the application. The Tribunal, in the case of Parle Agro Pvt. Ltd. vs. CC CGST Noida, held that interest should be granted from the date of deposit till the date of payment. Similarly, in the case of Marshal Foundary and Engg Pvt Ltd. vs. CGST Faridabad, the Tribunal upheld the entitlement to interest on delayed refunds.

The relevant provision in this context is Section 35FF of the Central Excise Act, 1944, which states that interest on delayed refunds is payable after the expiry of three months from the date of communication of the order of the appellate authority. The Hon’ble Apex Court, in the case of Sandvik Asia Ltd. vs. Commissioner of Income Tax I Pune, held that the assessee is entitled to claim interest from the date of payment of the initial amount till the date of its refund. This decision was followed by the Kerala High Court in the case of Sony Pictures Networks India Pvt. Ltd., which awarded interest at the rate of 12% per annum on delayed refunds.

Given that the appellant deposited the amount in 2014, even before the issuance of the Show Cause Notice, and the demand was later set aside, the deposit was under protest. Therefore, the appellant is entitled to interest at the rate of 12% from the date of deposit of the said amount. Consequently, the second issue is decided in favor of the appellant.

Conclusion:
As a result of the above discussion, the order under challenge is set aside, and the appeal is allowed. The appellant is entitled to interest at the rate of 12% per annum from the date of deposit of the amount until its realization.