1990 (9) TMI 92 - HC - Central Excise

Summary

Issues:
1. Classification of "furacin syrup" under Central Excise Tariff Item 15-A.
2. Refund of excise duty collected on "furacin syrup."
3. Justification for withholding the refund.
4. Awarding of interest on wrongfully withheld amount.

Classification Issue:
The respondent company marketed "furacin syrup" and contested its classification under Central Excise Tariff Item 15-A as "artificial or synthetic resins." The Division Bench of the High Court concluded that the respondent was not engaged in manufacturing, thus not liable for excise duty under the Central Excise and Salt Act, 1944. The Supreme Court upheld this decision, leading to a refund claim of Rs. 34,61,711-66 by the respondent.

Refund Issue:
Despite the Supreme Court's ruling, the appellants withheld the refund, prompting the respondent to file a writ petition seeking the refund. The appellants eventually refunded the amount during the pendency of the writ petition. The Single Judge directed the appellants to pay interest at 12% per annum on the refunded amount from the date of the Supreme Court's verdict.

Justification for Withholding Refund:
The appellants collected Rs. 34,41,085-47 wrongfully as excise duty from the respondent. The Court noted the appellants' unjustifiable withholding of the refund, especially after the Supreme Court's decision against levying excise duty on "furacin syrup." The appellants failed to provide any valid reason for withholding the refund, leading to the imposition of interest by the Single Judge.

Interest Award Issue:
The appellants argued that the Central Excises and Salt Act, 1944 did not provide for interest on wrongfully withheld amounts. However, the Court held that the absence of a specific provision did not bar the Court from exercising its equitable jurisdiction under Article 226 of the Constitution to award interest. Citing precedent, the Court emphasized the need to undo injustice and awarded interest based on equitable principles. The Court found the appellants' actions unreasonable and upheld the Single Judge's decision to award interest, dismissing the writ appeal.

This detailed analysis of the judgment highlights the issues of classification, refund, justification for withholding the refund, and the awarding of interest on wrongfully withheld amounts. The Court emphasized equitable principles, citing relevant legal provisions and precedents to support its decision to uphold the interest award.