2004 (10) TMI 192 - AT - Central Excise

Summary

Issues:
1. Refund of interest on Modvat credit denied by lower authority.
2. Validity of debiting interest through RG 23A Part-II.
3. Interpretation of Section 11B of the Central Excise Act, 1944.
4. Time-barred claim for refund as per Rule 233B of Central Excise Rules.

Analysis:
1. The appeal was filed by the Revenue against the Commissioner (Appeals) order denying the refund of interest on Modvat credit. The Tribunal had earlier set aside a portion of the denial, leading to the appellant's claim for a consequential refund. The Commissioner (A) sanctioned the refund of interest, which was contested by the Revenue in the current appeal.

2. The Revenue argued that the interest should not have been debited through RG 23A Part-II, as it is meant for duty payable on final goods only. However, the Tribunal noted that no objection was raised when the interest was debited initially. The Commissioner (Appeals) rightly held that the Revenue cannot object to the method of debiting when it comes to refunding the amount to the assessee.

3. Regarding the interpretation of Section 11B of the Central Excise Act, the Revenue contended that only excess duty paid can be refunded, and there is no provision for refunding interest under this section. However, the Tribunal observed that Section 11B covers not only duty but also fines and penalties, which must be refunded when set aside by a higher judicial forum. In this case, the refund of interest became due as a consequence of the Tribunal's order, and the Commissioner (A) correctly ruled that even interest paid in response to a demand is refundable.

4. The Revenue further argued that the claim for interest refund is time-barred as the appellant did not follow the procedure under Rule 233B of the Central Excise Rules. However, since no representation was made by the respondents, the Tribunal did not find merit in this argument and upheld the Commissioner (Appeals) order, rejecting the Revenue's appeal. The judgment emphasizes that the department is obligated to refund amounts paid by an assessee when successful in appeal, including interest payments, despite the absence of specific provisions in Section 11B for interest refunds.