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2009 (7) TMI 406 - AT - Central ExciseInterest on delayed refund - Duty paid in cash, pending classification dispute, without taking credit of duty on inputs, as it was not available - Total Modvat credit admissible to the appellants was more than the duty payable on reclassification. Therefore in the normal course they would not have paid any duty by using PLA. Therefore the total amount paid by them in cash becomes admissible as refund. Since the issue of unjust enrichment and limitation are not under challenge and there is no dispute about eligibility of the appellants for the refund and the refund to be allowed is only cash refund, it has to be held that appellants are eligible for interest on the refund claimed by them
Issues Involved:
1. Classification of plastic tapes under Chapter 39 or Chapter 54. 2. Entitlement to Cenvat credit and refund. 3. Payment of interest on the refund amount. Issue-wise Detailed Analysis: 1. Classification of Plastic Tapes: The primary dispute was whether the plastic tapes manufactured by the appellant should be classified under Chapter 39, as claimed by the appellant, or under Chapter 54, as held by the Department. This classification issue was settled in favor of the assessee, confirming that the tapes should be classified under Chapter 39, making them eligible for Cenvat credit. 2. Entitlement to Cenvat Credit and Refund: The appellant was initially compelled to pay duty under Chapter 54, which was not eligible for Cenvat credit, resulting in a total payment of Rs. 21,04,914/-. Upon reclassification under Chapter 39, the appellant filed a refund claim for Rs. 27,32,347/-. The original authority allowed a credit of Rs. 22,46,020/- in the Cenvat account, which was later modified by the Commissioner (Appeals) to a cash refund due to the closure of the appellant's unit. The Tribunal directed the original authority to re-determine the entitlement and examine the appellant's claim for a concessional rate of duty. 3. Payment of Interest on the Refund Amount: The appellant argued that the duty paid under protest should be refunded with interest as per Section 11B(2)(c) of the Act. The Commissioner (Appeals) denied the interest, stating that the payment in cash was a concession. The Tribunal examined whether the refund of accumulated Cenvat credit, due to the closure of the factory, should include interest. The Tribunal noted that the appellant paid duty in cash due to the classification dispute and would have utilized Modvat credit if classified under Chapter 39 initially. The Tribunal also considered whether the refund claim was pending as on the date of introduction of Section 11BB, which mandates interest on delayed refunds. Separate Judgments Delivered: - Member (Technical): The surplus credit in the Cenvat account cannot be treated as an interest-earning bank account. Thus, no interest is permissible on the refund. - Member (Judicial): The refund is essentially of the cash payment made during the relevant period due to the classification dispute. Hence, interest should be granted on the refund. Third Member's Decision: The Third Member agreed with the Member (Judicial), concluding that the appellant is entitled to interest on the refund amount. The Tribunal's majority decision upheld the appellant's claim for interest. Final Order: The appeal was allowed, and the appellant's claim for interest on the refund was upheld. The decision was pronounced in court on 2-7-2009.
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