2005 (1) TMI 109 - SC - Central Excise

Whether the Respondents were entitled to interest on the amount of Rs. 15,07,791/-? Held that - The Respondents have very fairly handed over to the Court the Appeal filed by them before the Tax Tribunal and the Order dated 28th January 1992. In the Appeal filed by them, the Respondents had prayed for interest at the rate of 18% per annum with effect from 8th January 1976 till payment. As already noted above, the Tribunal upheld the contention of the Respondents that they were entitled to credit, but the Tribunal did not grant interest. Having already made a prayer and the same not having been granted, it was not open to the Respondents to again make a claim for interest. As the Tribunal had not granted interest, Respondents cannot be allowed interest by claiming it again at a later date. This is not a case where the question, whether they were entitled to the credit of Rs. 15,07,791/-, was free from doubt. This was a question which was bona fide agitated. It is only in 1992 that this question was settled by the Tax Tribunal. This therefore is not a case where the money had been withheld unjustifiably. Thus even presuming, in law interest can be granted on grounds of equity this is not a case where such principles could be applied. If that be so, then in the absence of any provision in the contract or any statutory provision, interest could not have been awarded. The Appeal stands allowed.

Summary

Issues:
Claim for interest on a sum of money; Entitlement to interest on a delayed payment.

Analysis:
The case involved a dispute regarding the entitlement to interest on a sum of money claimed by the Respondents. The Respondents had initially claimed a rebate on excess sugar production, which was partially granted by the Assistant Collector. Subsequently, after a series of appeals and tribunal orders, the Respondents were granted the remaining rebate amount. The Respondents then filed an application for interest on the sum, which was rejected by the Assistant Collector, Collector (Appeals), and the Tribunal. The Respondents then approached the Allahabad High Court, which allowed their claim for interest at the rate of 10%. The Supreme Court analyzed the grounds on which interest could be granted in this case.

The Supreme Court highlighted that the Respondents had already prayed for interest in their earlier Appeal before the Tribunal, but it was not granted. The Court noted that once a prayer for interest had been made and not granted, the Respondents could not make the same claim again at a later date. The rejection of the claim for interest was not based on the absence of a provision in the Central Excise and Salt Act but on the fact that the Tribunal had not granted interest earlier. The Court emphasized that the Respondents cannot be allowed interest by reasserting the claim when it was already raised and rejected in the past.

Another crucial aspect considered by the Court was the bona fide nature of the dispute regarding the entitlement to the credit amount. The Court observed that the issue was only settled in 1992 by the Tax Tribunal after being genuinely contested. Since there was a legitimate dispute regarding the entitlement to the credit amount, the Court concluded that this was not a case where interest could be awarded based on principles of equity. In the absence of any contractual or statutory provision for interest, the Court held that interest could not be granted in this scenario.

Based on the above analysis, the Supreme Court set aside the impugned Judgment of the Allahabad High Court, allowing the Appeal of the Respondents regarding the claim for interest. The Court ruled that the Respondents were not entitled to interest on the sum of money, citing reasons related to the previous prayer for interest, lack of provision for interest, and the bona fide nature of the dispute. The Judgment concluded by stating that there would be no order as to costs in this matter.