2023 (8) TMI 183 - AT - Central Excise

Interest on the refund sanctioned by the department - provisions of the Central Excise Act namely Sections 11B and 11BB apply to the refund of Cenvat Credit or not - whether the respondent is entitle for interest on refund already sanctioned and if yes, from which date? HELD THAT - The refund which was filed on 01.06.2004 and 25.06.2004 for the period April-03 to September-03 was kept pending by the department, on the dispute that since the respondent s activity i.e. drawing of wire was held does not amount to manufacture, the respondent was not entitle for the Cenvat Credit and consequential refund of the said Cenvat Credit under Rule 5 of Cenvat Credit Rules, 2004 was also under dispute. The eligibility of Cenvat Credit in the above facts was extended by retrospective amendment of Rule 16 of Central Excise Rules, 2002. Whereby, the assessee (wire drawing units) becomes entitled for the Cenvat Credit on 13.07.2006. The revenue s contention that the Rule 5 refund is not eligible for interest as the provisions of Section 11B and 11BB are not applicable, for such refund under Rule 5 is no longer under dispute in the light of the jurisdictional High Court of Gujarat judgment in the case of COMMISSIONER OF CENTRAL EXCISE VERSUS RELIANCE INDUSTRIES LTD. 2010 (10) TMI 190 - GUJARAT HIGH COURT . Therefore, there is no doubt that the respondent are legally entitle for the interest under Section 11BB of Central Excise Act, 1984. Period for which the respondent should be granted interest of refund - HELD THAT - Even though the respondent had filed the refund claim on 01.06.2004 and 25.06.2004 but at that time there was no clear provision for allowing the Cenvat Credit on the inputs to the Wire drawing units therefore, there was no reason for revenue to grant the refund under Rule 5 till the retrospective amendment in Rule 16 was brought i.e. on 13.07.2006. However, after the amendment dated 13.07.2006 in Rule 16 the respondent became eligible for refund of accumulated Cenvat credit under Rule 5 of Cenvat Credit Rules, 2004. Therefore, the revenue was supposed to sanction the refund within three months from the date of retrospective amendment i.e. from 13.07.2006 however, the refund was sanctioned on 14.06.2012. Therefore, there is a delay in sanction of the refund after three months from the date of retrospective amendment dated 13.07.2006. The respondent is entitled for the interest only for the period i.e. from the date of three months of 13.07.2006 till the sanction of refund i.e. 14.06.2012 - Sanctioning Authority shall recalculated the interest accordingly and grant the same to the respondent. Appeal allowed in part.

Summary

Issues involved: Eligibility of interest on refund sanctioned by the department under Rule 5 of Cenvat Credit Rules, 2004 and applicability of Sections 11B and 11BB of the Central Excise Act.

Eligibility of interest on refund:
The revenue appealed against the order of Commissioner (Appeals) regarding the eligibility of interest on the refund sanctioned by the department. The department contended that Sections 11B and 11BB of the Central Excise Act do not apply to the refund of Cenvat Credit under Rule 5 of Cenvat Credit Rules, 2004. On the other hand, the respondent argued that various court decisions, including those by the Hon'ble Gujarat High Court and the Hon'ble Supreme Court, have established that Sections 11B and 11BB are indeed applicable to the refund of accumulated Cenvat Credit. The respondent further emphasized that the department's delay in sanctioning the refund after a retrospective amendment in 2006 does not absolve them from paying interest. The Tribunal found that the respondent is entitled to interest on the refund from the date of three months after the retrospective amendment until the actual sanction of the refund in 2012.

Applicability of Sections 11B and 11BB:
The Tribunal examined whether the provisions of Sections 11B and 11BB of the Central Excise Act apply to the refund of accumulated Cenvat Credit under Rule 5 of Cenvat Credit Rules, 2004. It was established through legal precedents, such as the judgments in the cases of Reliance Industries Ltd and M/s Netapp India Pvt. Ltd, that these sections are indeed applicable to such refunds. The Tribunal emphasized that the revenue's argument that continuous litigation delayed the refund was not valid, especially after the retrospective amendment in 2006 resolved the issue. Therefore, the Tribunal concluded that the respondent is legally entitled to interest under Section 11BB of the Central Excise Act, 1984, for the period specified.

Decision:
After considering the arguments from both sides and reviewing the records, the Tribunal determined that the respondent is entitled to interest on the refund sanctioned by the department. The Tribunal clarified that the interest should be calculated from the date of three months after the retrospective amendment in 2006 until the actual sanction of the refund in 2012. The impugned order was modified accordingly, and the Sanctioning Authority was directed to recalculate and grant the interest to the respondent. Ultimately, the revenue's appeal was partly allowed based on the above considerations.