2003 (3) TMI 166 - AT - Central Excise

Summary

Issues Involved:
1. Date when the Revenue's liability to pay interest starts.
2. Entitlement to interest up to the date of sanction of refund or actual date of grant of refund.
3. Payment of interest on delayed interest.
4. Entitlement to claim interest for refunds filed before the introduction of Section 11BB.

Detailed Analysis:

1. Date when the Revenue's liability to pay interest starts:
The central issue is the interpretation of the "date of receipt of application" under Section 11BB of the Central Excise Act, 1944. The Revenue contended that the interest liability starts from the date when the cheques issued by the appellant to the taxi owners were encashed. Conversely, the appellant argued that the interest should start from the date of filing the refund application, supported by certificates from the State Transport Authorities and proof of cheque issuance. The Tribunal referenced judgments from the Madras High Court and the Supreme Court, which clarified that payment by cheque, unless dishonored, is considered effective from the date of issuance. Circulars from the Board also supported the appellant's view, emphasizing that the refund application should be filed within six months from the date of duty payment and that proof of cheque issuance suffices. Thus, the Tribunal concluded that the interest liability starts three months after the filing of the refund application, not from the date of cheque encashment.

2. Entitlement to interest up to the date of sanction of refund or actual date of grant of refund:
The Tribunal examined Section 11BB, which mandates interest payment "till the date of refund." It determined that interest should be paid until the actual refund is issued to the assessee, not merely until the refund order is sanctioned. This interpretation was reinforced by a Ministry Circular, which specified that interest should be calculated up to the date of cheque dispatch. Therefore, the appellant is entitled to interest until the cheque is issued.

3. Payment of interest on delayed interest:
The appellant argued that the department must pay interest on the delayed interest amount, citing the Supreme Court's judgment in CIR v. Narendra Doshi, which upheld interest on interest under similar provisions of the Income Tax Act. The Tribunal also referred to the Gujarat High Court's decisions, which supported the notion that delayed interest payments should accrue further interest. Consequently, the Tribunal allowed the appellant's claim for interest on the delayed interest amount.

4. Entitlement to claim interest for refunds filed before the introduction of Section 11BB:
The appellant relied on the Supreme Court's judgment in UOI v. Justice S.S. Sandhawalia, which held that interest is payable on amounts legally due but withheld. However, the Tribunal noted that prior to the introduction of Section 11BB, there was no statutory provision for interest under the Central Excise Act. As the Tribunal is bound by the Act, it rejected the appellant's claim for interest on refunds filed before the enactment of Section 11BB.

Additional Aspect:
The Tribunal addressed the appellant's contention regarding the partial rejection of the interest claim amounting to Rs. 1,26,35,979/-. It agreed with the appellant's argument that the appeal should cover the entire order, including the partial rejection, despite the incorrect amount mentioned in the appeal memo. Thus, the Tribunal treated the appeal as encompassing both the full rejection of Rs. 1,91,20,068/- and the partial rejection of Rs. 1,26,35,979/-.

Conclusion:
The Tribunal directed the original adjudicating authority to calculate the interest based on the clarified issues. The appeal was disposed of accordingly.