2007 (8) TMI 349 - HC - Central Excise

Whether the refund claim of excess amount of interest paid by the party under Section 11B of the Central Excise Act, 1944, is legally correct? Held that - In the present case, it is undisputed that the rate of interest leviable on the respondent-assessee was 15% as was reduced by notification dated 13-5-2002, issued under Section 11AA and Section 11AB of the Act. However, the respondent-assessee had paid interest @ 24% per annum erroneously and an amount of ₹ 1,20,809/- has been ordered to be refunded. We find no reason to exclude the payment of interest from the provisions of Section 11B of the Act merely because it uses the expression refund of duty because delayed payment of duty itself attract the payment of interest which is inextricably associated with duty. Moreover, such a collection of interest on account of delayed payment of duty would be unauthorised imposition of tax which is impermissible by the provisions of Article 265 of the Constitution. There is, thus, no merit in this appeal. W.P. dismissed.

Summary

Issues:
Refund claim of excess interest paid under Section 11B of the Central Excise Act, 1944.

Analysis:
1. The appeal filed by the appellant-revenue under Section 35G of the Central Excise Act, 1944 sought to quash an order passed by the Tribunal regarding the refund claim of excess interest paid by the party under Section 11B of the Act. The appellant-revenue contended that the legality of the refund claim needed determination.

2. The assessee-respondent, engaged in manufacturing pesticides and insecticides, filed a refund claim under Section 11B of the Act, stating they had paid excess interest on the differential duty payable during 2001-2002. The refund claim was rejected by the adjudicating authority and the Commissioner (Appeals) based on the argument that Section 11B only allowed for the refund of duty paid erroneously, not interest.

3. The Tribunal set aside the Commissioner (Appeals) order and directed the appellant-revenue to refund the excess interest paid by the respondent-assessee. The Tribunal noted that the interest payable during the relevant period was 24% per annum until a notification was issued for an effective rate of 15% from a certain date, which the department failed to consider.

4. The Tribunal rejected the department's contention that Section 11B does not provide for the refund of interest, emphasizing that the payment of interest is closely linked to the payment of duty, especially in cases of delayed payment or refund.

5. The judgment highlighted the provisions of Section 11B, which allow for the refund of duty by making an application to the competent authority within a specified period, accompanied by necessary evidence. It also referenced Section 11AB, which mandates the payment of interest on delayed duty payment, and Section 11BB, which covers interest on delayed refunds.

6. The Court emphasized that the payment of interest is intertwined with duty payment and refund, and excluding interest from the purview of Section 11B would lead to unauthorized imposition of tax, contravening constitutional provisions. The appeal was dismissed as frivolous, and the appellant was directed to pay costs.

This detailed analysis covers the issues involved in the legal judgment comprehensively, outlining the arguments presented, the Tribunal's decision, and the Court's reasoning for dismissing the appeal.