2024 (8) TMI 596 - AT - Central Excise

Rate of interest on delayed refunds - appellant claimed the interest @12% for the delayed payment - interest would be restricted to 6% p.a. as per Section 11 BB of the Central Excise Act, 1944 or not. Whether rate of interest on delayed refunds, which vary within the range @5% to 30% as per Section 11BB of Central Excise Act, 1944 can be given @ 12% per annum as claimed by the appellant, or as per the N/N.67/2003-CE (N.T.) issued under Section 11BB which restricts the rate of interest at 6% in case of delayed refund? HELD THAT - The issue is no longer res integra and has been considered and settled by the two High Courts. In the case of C. PADMINI CHINNADURAI VERSUS ASSTT. COMMR. OF C. EX., TIRUNELVELI 2010 (7) TMI 356 - MADRAS HIGH COURT , the Division Bench rejected the contention of the appellant that since it is pre-deposit and not central excise duty , therefore, the notification no.67/2023 would not apply, observing 'the respondent was directed to pay interest at the rate of 8% from 2-9-2003 to 11-9-2003 and 6% from 12-9-2003 to till the date of payment.' Similarly, the Karnataka High Court in COMMISSIONER OF C. EX., BANGALORE VERSUS HINDUSTAN GRANITES 2015 (1) TMI 1385 - KARNATAKA HIGH COURT considered the said notification, which was issued in exercise of the powers conferred by Section 11BB of CEA fixing the rate of interest @6% p.a. for the purpose of said section and holding that interest payable in terms of Section 11BB of the Act, which in turn is with reference to the notification referred above, the rate of interest was reduced from 9% to 6%. Section 11BB specifies that interest shall be paid to the applicant at such rate not below 5% and not exceeding 30% p.a., which may be fixed by the Central Government by issuing the notification on such duty and, therefore, the notification no.67/2003 has been issued fixing the interest @ 6% p.a. on the delayed payment of refund and hence, the same has been rightly allowed to the appellant. Merely because the appellant has claimed interest @12% mis-interpreting the earlier decisions, does not entitle him to the said rate. The contention of the appellant that the order has been passed beyond the scope of the show cause notice is not sustainable as the same has been passed in consonance with the notification, which has been validly issued under the provisions of Section 11BB of the Act. There are no reason to interfere with the impugned orders and hence, the same are affirmed - appeal dismissed.

Summary

Issues:
Rate of interest on delayed refunds - Whether 12% or 6% as per Section 11BB and Notification No.67/2003-CE (N.T.)

The Appellate Tribunal CESTAT NEW DELHI heard two appeals filed by M/s.Dinesh Tobacco Industries Ltd. challenging the order-in-appeal affirming interest on the refund amount at 6% instead of 12%. The appellant, engaged in the manufacture of Pan Masala and Gutkha, filed a refund application for central excise duty paid under a compounded levy scheme on exported goods. The Tribunal remanded the matter, and the Competent Authority later allowed the refund application but denied interest, stating it was sanctioned within the 3-month period. The appellant claimed interest from 01.11.2009 to 05.09.2017. The Adjudicating Authority rejected the interest claim of Rs.2,65,54,112, leading to the present appeals before the Tribunal.

During the hearing, the appellant's counsel argued for interest at 12% based on Supreme Court and High Court decisions, contending that the amount was a revenue deposit, not duty, so Section 11BB did not apply. The counsel referenced a Tribunal decision allowing 12% interest on similar grounds. The respondent's Authorized Representative supported the lower authorities' findings, citing Notification No.67/2003-CE (N.T.) restricting interest to 6% for delayed refunds. The Representative also relied on High Court decisions followed by a recent Tribunal judgment.

The main issue was whether the interest rate on delayed refunds should be 12% as claimed by the appellant or 6% per Notification No.67/2003-CE (N.T.). The Tribunal referenced High Court judgments affirming the applicability of the notification, which reduced the interest rate to 6% under Section 11BB of the Central Excise Act. The Tribunal rejected the appellant's arguments, stating that the notification's validity under Section 11BB justified the 6% interest rate. The Tribunal upheld the lower authorities' decisions, dismissing the appeals and allowing the miscellaneous applications.

In conclusion, the Tribunal affirmed the interest rate at 6% for delayed refunds, rejecting the appellant's claim for 12% interest. The Tribunal held that the notification validly issued under Section 11BB governed the interest rate, and the appellant's misinterpretation of earlier decisions did not warrant the higher rate. The Tribunal found no grounds to interfere with the lower authorities' orders, ultimately dismissing the appeals and allowing the miscellaneous applications.