2022 (5) TMI 645 - AT - Central Excise

Interest on delayed refund - relevant date for calculation of refund - refund sanctioned before issuance of SCN - HELD THAT - Since the entire amount as was proposed to be recovered from the appellant was got deposited even prior to the issuance of Show Cause Notice and since the said demands stand already set aside, it stands clear that the said amount was not the liability of the appellant to be deposited i.e. it was not the amount of duty. Hence section 11B of Central Excise Act creating the notion of three months as impressed upon by learned Departmental Representative, is no applicable to the facts of present case. The amount which stands deposited since 06.07.2012 has been kept with the department with no authority for retaining the same. The Hon ble Apex Court also has settled this issue in the case of SANDVIK ASIA LIMITED VERSUS COMMISSIONER OF INCOME-TAX AND OTHERS 2006 (1) TMI 55 - SUPREME COURT holding the assessee entitled for interest along with the refund of the amount which he was not liable to pay to the department. In the Sandvik Asia case, Hon ble Apex Court has appreciated section 243 of Income Tax Act which talks about the interest of delayed refund. Section 35FF of Central Excise Act, 1944 deals with similar situation and has actually held as para materia to section 243 of Income Tax Act by the Hon ble Apex Court. Thus, it is held that Commissioner (Appeals) has committed an error while rejecting the claim of the interest on the entire amount of refund. No justification for the bifurcation have been given while sanctioning the interest only on the amount of pre deposit has been given in the order. It is also observed that the findings of the claim to be barred by time are also not correct as the relevant date for recovery period is considered as date of filing the appeal (i.e. 01.09.2014). Inspite of date of communication of the final order entitling the appellant from the impugned relief, 30.6.2017. Seeing from this angle also the order under challenge is not sustainable. The appellant is held entitled for the interest on the remaining amount of refund also that too at the rate of 12 Percent to be calculated from the date of payment thereafter - appeal allowed - decided in favor of appellant.

Summary

Issues:
- Sanction of interest on refund claim
- Rejection of interest on certain amount
- Applicability of Section 11B of Central Excise Act
- Entitlement for interest on the entire refund amount
- Correct date for calculating interest

Sanction of Interest on Refund Claim:
The appeal was filed to challenge the Order-in-Appeal sanctioning a refund claim of Rs.60,87,300 but not granting interest on the amount except for Rs.46,662. The appellant argued for interest on the deposit amount, citing precedents and settled law. The Department contended that the refund was sanctioned within the stipulated time, thus no entitlement for interest. The Tribunal observed that the deposit was made during investigation, not as duty liability, and held in favor of the appellant, citing relevant judgments and legal provisions.

Rejection of Interest on Certain Amount:
The appellant contended that interest on only Rs.46,662 of the pre-deposit amount was in violation of established law. The Department argued against the claim, stating it was time-barred. The Tribunal found the rejection of interest on the remaining refund amount erroneous, setting aside the order and ruling in favor of the appellant for interest at a rate of 12% from the date of payment.

Applicability of Section 11B of Central Excise Act:
The Tribunal examined the applicability of Section 11B of the Central Excise Act, emphasizing that the amount deposited by the appellant was not a duty liability but a deposit under protest. Citing relevant judgments and legal provisions, the Tribunal concluded that the deposit was not subject to the three-month rule under Section 11B, thereby rejecting the Department's argument based on this provision.

Entitlement for Interest on the Entire Refund Amount:
The Tribunal analyzed various decisions and legal provisions to establish the appellant's entitlement to interest on the entire refund amount, not just a portion of it. Referring to precedents and the nature of the deposit, the Tribunal held that the appellant was entitled to interest at a rate of 12% on the remaining refund amount from the date of payment, overturning the rejection of interest by the Commissioner (Appeals).

Correct Date for Calculating Interest:
The Tribunal clarified the correct date for calculating interest on the refund amount, highlighting that the claim was not time-barred as argued by the Department. By considering the date of filing the appeal and the communication of the final order, the Tribunal determined that the appellant was entitled to interest on the remaining refund amount at a rate of 12% from the date of payment, ultimately allowing the appeal and setting aside the previous order.