1990 (7) TMI 118 - HC - Central Excise

Issues Involved:
1. Whether the petitioner is entitled to interest on the excise duty found refundable.
2. Validity of Rule 233-B (1) of the Central Excise Rules, 1944.

Detailed Analysis:

1. Entitlement to Interest on Refundable Excise Duty:
The petitioner, engaged in repairing old, defective, and unserviceable cops, was levied excise duty for the period from 17-3-1981 to 7-6-1986, treating the repair work as a manufacturing activity. Despite protesting, the petitioner complied under protest and filed a classification list under Rule 173-B of the Central Excise Rules, 1944. The Assistant Collector deemed the activity dutiable under Tariff Item 68, which was upheld by the Collector of Central Excise on 1-8-1984. However, the CEGAT allowed the appeal on 21-5-1986, remanding the matter for fresh adjudication, and later clarified on 30-3-1987 that the levy was impermissible. The petitioner ceased paying duty from 7-6-1986 and sought a refund for the period in question. The Assistant Collector rejected the refund claims on 28-1-1988, citing non-compliance with Rule 173-B. The petitioner appealed successfully, and the department's subsequent appeal was dismissed by the CEGAT on 29-3-1989. The refund was made on 9-11-1989.

The main issue now was whether interest should be awarded on the refunded amount. The Court noted that the Act and Rules do not provide for payment of interest on refunds, indicating a deliberate legislative omission. The authorities under the Act, including the CEGAT, lack the power to award interest, as they must operate within the confines of the Act and Rules. The Court examined whether it should exercise its equitable power to award interest, concluding that merely being deprived of money does not automatically entitle one to interest. The petitioner failed to establish circumstances warranting the exercise of equitable jurisdiction. The Court cited Halsbury's Laws of England and American Jurisprudence, noting that interest may be awarded in specific fiduciary relationships or cases of misconduct, which did not apply here.

The Court also referenced several High Court decisions where interest was awarded on refunded excise duty, noting that these decisions lacked detailed discussion on the principles for awarding interest or the discretionary nature of the Court's power under Article 226. The Court emphasized that the grant of interest is not automatic and depends on the facts of each case. The Court distinguished the present case from others, noting that the petitioner likely passed the burden to consumers and did not suffer a direct loss. The Court also highlighted that its power under Article 226 is discretionary and should further justice, not be exercised mechanically.

2. Validity of Rule 233-B (1) of the Central Excise Rules, 1944:
The petitioner sought a declaration that Rule 233-B (1) is ultra vires the Act. However, no arguments were addressed on this issue during the hearing, and the Court did not provide a detailed analysis or ruling on this matter.

Conclusion:
The writ petition was dismissed, with the Court holding that there was no equity in favor of the petitioner to warrant the award of interest on the refunded excise duty. The Court emphasized the discretionary nature of its jurisdiction under Article 226 and the absence of statutory provisions for interest in the Central Excise Act and Rules. The validity of Rule 233-B (1) was not addressed in the judgment.

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