2000 (6) TMI 32 - HC - Central Excise

Summary

Issues Involved:
1. Refund of Rs. 1 crore pre-deposit.
2. Applicability of Section 11B of the Central Excise Act, 1944.
3. Jurisdiction and discretion under Article 226 of the Constitution.
4. Alleged pre-determination by the first respondent.
5. Entitlement to interest under Section 11BB of the Central Excise Act, 1944.

Detailed Analysis:

1. Refund of Rs. 1 crore pre-deposit:
The petitioner company sought the refund of Rs. 1 crore deposited as a pre-condition for the hearing of an appeal before the Commissioner of Customs and Central Excise (Appeals), Hyderabad. The CEGAT had allowed the appeal and remanded the matter for de novo consideration. The first respondent rejected the refund claim, stating it was premature and based on hypothetical grounds, such as the pending Supreme Court decision and the potential liability to duty. The court found these reasons untenable and legally flawed, emphasizing that the pre-deposit was made under Section 35F of the Act and should be refunded if the appeal is allowed.

2. Applicability of Section 11B of the Central Excise Act, 1944:
The petitioner contended that Section 11B, which deals with claims for refund of duty, was not applicable to the refund of pre-deposits. However, the court held that all refunds, except those for unconstitutional levies, are governed by Section 11B, as established in the Supreme Court's decision in Mafatlal Industries Ltd. v. Union of India. The court noted that the petitioner had filed the refund claim in Form R under Section 11B, thereby subjecting itself to the jurisdiction of the first respondent under this section.

3. Jurisdiction and discretion under Article 226 of the Constitution:
The court acknowledged that while an alternative remedy exists under Section 35 of the Act, the High Court can exercise its discretionary powers under Article 226 in exceptional circumstances. The court found an error apparent on the face of the impugned order and decided to exercise its discretion to address the issue, despite the existence of an alternative remedy.

4. Alleged pre-determination by the first respondent:
The court criticized the first respondent's pre-determination of the issue, noting that the observation that the chances of the demand becoming a nought were scarce showed a bias. The court emphasized that the first respondent should not refuse the refund except on the ground that the incidence of duty had been passed on to the consumers, which was not addressed in the impugned order.

5. Entitlement to interest under Section 11BB of the Central Excise Act, 1944:
The petitioner also sought interest on the refund amount under Section 11BB. However, the court held that the entitlement to interest would arise only after establishing that the incidence of duty had not been passed on to the consumers. Therefore, the claim for interest was left open to be agitated at an appropriate stage.

Conclusion:
The court quashed the impugned order and remanded the matter to the first respondent for fresh consideration of the refund claim in accordance with the law. The first respondent was directed to give the petitioner a reasonable opportunity to prove that the incidence of duty had not been passed on to the consumers. If satisfied, the first respondent was instructed to refund the pre-deposit without further delay. The petitioner's claim for interest under Section 11BB was left open for future determination.