2001 (11) TMI 96 - HC - Central Excise

Summary

Issues:
Claim for Modvat credit declined by Commissioner, refund of deposited amount with interest, legality of orders passed by Authorities, entitlement to refund in cash or credit to Cenvat Account, delay in refund, impact on petitioner's business, calculation of interest, transfer of amount in case of policy change.

Analysis:
1. The petitioner, engaged in the manufacture of aerated water, had its Modvat credit claim of Rs. 1,10,66,702.46 declined by the Commissioner, Central Excise on May 9, 1995. An appeal was filed, and the Tribunal directed the petitioner to deposit Rs. 80,00,000/- within three months from the order date, which was complied with on February 7, 1996.

2. Subsequently, on August 17, 1999, the Commissioner's order was set aside, and the petitioner applied for a refund of the deposited amount. Despite various representations, the refund was not granted until June 6, 2001, when it was sanctioned as a credit in Cenvat without interest. The petitioner contended that the refund should include interest from the date of deposit.

3. Respondent Nos. 3 and 4 filed short replies, detailing inter-departmental communications on the refund. The petitioner argued for interest from the date of deposit, citing financial losses due to illegal demands, leading to the closure of the unit, impacting revenue generation for the State.

4. The Court found the respondents' actions arbitrary and unjust, noting the delay in refund despite the order set aside in 1999. The Board's failure to respond to refund requests and the illegal withholding of funds by respondents were criticized for causing prolonged suffering to the petitioner.

5. After hearing both parties, the Court concluded that the petitioner was entitled to a refund with interest. It was decided that the amount of Rs. 80,00,000/- along with interest as per Section 11BB of the Central Excise Act, 1944, should be credited to the petitioner's Cenvat Account in Himachal Pradesh, providing the option to utilize the credit for any future liabilities.

6. The Court clarified that interest should be calculated from the date of deposit in 1996, not from 1999. Additionally, in case of any changes in Cenvat Policy, the petitioner could claim the transfer of the amount for Excise Duty payment. The petition was disposed of with the petitioner awarded costs of Rs. 10,000/-.