1986 (8) TMI 248 - AT - Central Excise

Summary

Issues:
1. Refund of handloom cess and interest on duty on cotton yarn used in the manufacture of cotton fabrics exported out of India.
2. Interpretation of Section 3 of the Khadi and Other Handloom Industries Development (Additional Excise Duty on Cloth) Act, 1953.
3. Validity of refund of handloom cess.
4. Validity of refund of interest on the amount of duty on cotton yarn.

Analysis:

Issue 1: Refund of handloom cess and interest on duty on cotton yarn used in the manufacture of cotton fabrics exported out of India.

The Collector of Central Excise, Baroda, appealed against the order allowing the refund of handloom cess and interest on duty on cotton yarn by the Collector of Central Excise (Appeals), Bombay. The Collector argued that there is no provision for refund of duty under Section 3 of the Act and that interest on deferred duty is not refundable. The Tribunal found that the refund of handloom cess is permissible under Section 11B of the Central Excises and Salt Act, 1944, if the cess is not leviable, as in the case of exported goods. The Tribunal upheld the refund of handloom cess as the cloth on which the cess was paid was used in the manufacture of exported napkins, satisfying the proviso under Section 3. Therefore, the refund of handloom cess was deemed admissible.

Issue 2: Interpretation of Section 3 of the Khadi and Other Handloom Industries Development (Additional Excise Duty on Cloth) Act, 1953.

The Tribunal clarified that under sub-section (2) of Section 3, the duty of excise on cloth is in addition to the duty under the Central Excises and Salt Act, 1944, and the handloom cess is collected in the same manner as excise duty on cloth. The Tribunal emphasized that the machinery provisions of the Central Excises and Salt Act, 1944, apply to the collection of handloom cess, making it refundable under Section 11B if not leviable. The Tribunal rejected the argument that Section 3 does not provide for refund, stating that the refund of handloom cess can be claimed under the applicable provisions.

Issue 3: Validity of refund of handloom cess.

The Tribunal confirmed the validity of the refund of handloom cess, noting that the claim for refund filed by the appellant was in order and that the Assistant Collector had already sanctioned the refund of basic excise duty. The Tribunal upheld the Collector of Central Excise (Appeals), Bombay's order regarding the refund of handloom cess.

Issue 4: Validity of refund of interest on the amount of duty on cotton yarn.

Regarding the refund of interest on the duty on cotton yarn used in the manufacture of napkins, the Tribunal found that interest collected under Rule 49A is not refundable as it does not fall under the definition of duty of excise. The Tribunal agreed with the Ministry of Law's advice that interest is not a duty for the purpose of refund under Rule 12A or Section 11B. Therefore, the refund of interest on the duty on cotton yarn was deemed inadmissible, and the Tribunal set aside the Collector of Central Excise (Appeals) Bombay's order, restoring the Assistant Collector of Central Excise, Bulsar's decision.

In conclusion, the Tribunal partially allowed the appeal of the Collector of Central Excise, Baroda, by confirming the refund of handloom cess but denying the refund of interest on the duty on cotton yarn used in the manufacture of napkins exported out of India.