1998 (3) TMI 136 - SC - Central Excise

Interest on demand - Held that - In the present case, the appellant's submission that he should not be asked to pay interest on the entire amount of ₹ 6,20,28,059.98 has not impressed us, looking to the intervening changes in the law as a result of the insertion of Section 11B and the decision of this Court in the case of Mafatlal Industries Ltd. v. Union of India (1996 (12) TMI 50 - SUPREME COURT OF INDIA) and the facts and circumstances of the case. The order directing the appellant to pay interest, however, is modified as follows in the facts and circumstances of the present case set out above. We, therefore, direct the appellant to pay interest at the rate of 12% per annum on the said amount of ₹ 6,20,28,059.98 from 1-10-1991 to 1-5-1997, the latter date being the date when the entire principal amount was recovered by the respondents. The appeal is, therefore, dismissed with the above modification in the High Court's order.

Summary

Issues:
1. Refund of excise duty based on valuation of goods.
2. Calculation of refund amount including post-manufacturing expenses.
3. High Court's order directing payment of refund.
4. Applicability of amendments in Central Excises and Salt Act.
5. Payment of interest on refund amount.

Analysis:

1. The appellant, a cigarette manufacturer, initially filed price lists based on the distributor's selling price, later realizing the error and filing revised lists based on the manufacturer's selling price. The appellant sought a refund of excise duty for the period 1-3-1965 to 31-8-1972, excluding a period already refunded. The High Court allowed the refund claim, directing the Excise department to calculate and pay the amount due.

2. The Assistant Commissioner calculated the refund amount for the specified period based on two aspects: first, the price charged to distributors instead of wholesalers, resulting in a refund of Rs. 1,72,76,320.14; second, deduction of post-manufacturing expenses, leading to a refund of Rs. 4,47,51,719.14. The expenses included interest, bank charges, advertisement, publicity, selling, distribution, and marketing expenses.

3. Despite the High Court's order to pay the calculated refund amounts by a specified date, the payments were not made. Subsequently, the appellant filed a writ petition for the recovery of the refund amounts. The High Court admitted the petition, directed an interim refund against bank guarantees, and later ordered the appellant to deposit the refund amount with interest.

4. The appellant's claim for refund was affected by the introduction of Sections 11B(1) and 11B(2) in the Central Excises and Salt Act in 1991. The Assistant Commissioner rejected all refund claims based on these sections, citing the amendment's applicability. A departmental appeal on this matter is pending for consideration.

5. Regarding the payment of interest on the refund amount, the High Court ordered the appellant to pay interest at 12% per annum from 1-11-1982. However, the Supreme Court modified this order, directing the appellant to pay interest at the same rate from 1-10-1991 to 1-5-1997, the date of complete recovery by the respondents. The appeal was ultimately dismissed with this modification.