2024 (12) TMI 1404 - HC - Central Excise

Relevant date for calculation of interest on the refund of the deposit made under protest - to be calculated from the date of deposit or from the date specified under Section 11BB of the Central Excise Act, 1944? - applicability of provisions of Section 11B and 11BB of the Central Excise Act, 1944. HELD THAT - Merely because the petitioner was compelled to pay the amount of Rs. 22,93,439/-by the respondent prior to issuance of show-cause notice or adjudication, the principle of restitution would not be attracted in view of the subsequent event which has taken place of passing Order-in-original determining the demand of central excise duty with interest and penalty which had subsisted up to the order passed by the CESTAT allowing the appeal of the petitioner. Therefore, the contention raised on behalf of the petitioner that date of amount deposited by the petitioner under protest would have to be considered for claim of interest payable to the petitioner to consider the amount deposited as deposit as the said amount has thereafter been adjusted against outstanding demand which was quantified by the respondent-authority while passing the Order-in-original. Even the Commissioner (Appeals) upheld the Order-in-original and only after the CESTAT allowed the appeal of the petitioner, the petitioner was entitled to the refund of the amount duty which was adjusted form the amount deposited by the petitioner under protest. This Court, in case of KAMAKSHI TRADEXIM (INDIA) PVT. LTD. AND 1 VERSUS UNION OF INDIA AND 1 2017 (4) TMI 223 - GUJARAT HIGH COURT following the decision of Ranbaxy Laboratories (Ltd) (supra), has held that from a bare reading of Section 11B (2) and 11BB of the Act, it is clear that if the concerned authority was satisfied on the claim of the applicant of refund, then the refund was to be paid within three months from the date of the receipt of the application for refund and if it was not so paid then interest had to be paid on it under Section 11BB of the Act. The contentions raised on behalf of the petitioner that the petitioner is entitled to interest from that date of deposit made under protest in the year 2005 is incorrect as the refund was granted to the petitioner under section 11B of the Act and accordingly interest is rightly awarded under section 11BB of the Act. Conclusion - Interest under Section 11BB of the Act becomes payable on the expiry of a period of three months from the date of receipt of the application under Sub-section (1) of Section 11B of the Act. Thus, no interference is called for in the impugned orders passed by the Commissioner (Appeals) which is upheld by the CESTAT granting interest on refund as per section 11BB of the Act - petition dismissed.

1. ISSUES PRESENTED and CONSIDERED

The legal judgment primarily revolves around the following issues:

Whether the petitioner is entitled to interest on the refund of the deposit made under protest from the date of deposit or from the date specified under Section 11BB of the Central Excise Act, 1944.
Whether the provisions of Section 11B and 11BB of the Central Excise Act, 1944, apply to the refund of the deposit made by the petitioner.
Whether the principle of restitution applies to the refund of the deposit made by the petitioner.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Entitlement to Interest from the Date of Deposit

Relevant Legal Framework and Precedents: The petitioner argued for interest from the date of deposit based on the principle of restitution and various precedents, including ONGC Ltd vs. Commissioner of Customs and others. The respondent relied on Section 11BB of the Central Excise Act, 1944, and the Supreme Court decision in Ranbaxy Laboratories Ltd vs. Union of India, which specifies that interest is payable from three months after the application for refund.
Court's Interpretation and Reasoning: The court emphasized that the provisions of Section 11BB apply to the refund process, and interest is payable from three months after the application for refund, not from the date of deposit.
Key Evidence and Findings: The court found that the petitioner's deposit was adjusted against the demand confirmed by the authorities, thus transforming it into a duty payment rather than a mere deposit.
Application of Law to Facts: The court applied the provisions of Section 11BB, holding that interest is payable from the date specified therein, as the refund was processed under Section 11B.
Treatment of Competing Arguments: The court rejected the petitioner's argument for interest from the date of deposit, citing the Supreme Court's interpretation in Ranbaxy Laboratories Ltd.
Conclusions: The court concluded that the petitioner is entitled to interest from the date specified under Section 11BB, not from the date of deposit.

Issue 2: Applicability of Sections 11B and 11BB

Relevant Legal Framework and Precedents: Sections 11B and 11BB of the Central Excise Act, 1944, were central to the dispute. The petitioner argued these sections were inapplicable, citing decisions like Kuil Fireworks Industries vs. Collector of Central Excise.
Court's Interpretation and Reasoning: The court held that the refund process was governed by Section 11B, and interest on delayed refunds is governed by Section 11BB.
Key Evidence and Findings: The court noted the adjustment of the deposit against the duty demand, affirming the applicability of Sections 11B and 11BB.
Application of Law to Facts: The court applied the statutory provisions to affirm that the refund and interest were correctly processed under Sections 11B and 11BB.
Treatment of Competing Arguments: The court dismissed the petitioner's reliance on alternative precedents, emphasizing the statutory framework and the Supreme Court's interpretation.
Conclusions: The court concluded that Sections 11B and 11BB were applicable, and the refund process adhered to these provisions.

Issue 3: Principle of Restitution

Relevant Legal Framework and Precedents: The petitioner invoked the principle of restitution, arguing for interest from the date of deposit. The respondent countered with the statutory provisions and relevant case law.
Court's Interpretation and Reasoning: The court held that the principle of restitution did not override the specific statutory provisions governing interest on refunds.
Key Evidence and Findings: The court found no basis for applying restitution in the face of clear statutory guidelines.
Application of Law to Facts: The court applied the statutory framework, rejecting the application of restitution in this context.
Treatment of Competing Arguments: The court prioritized statutory interpretation over equitable principles like restitution.
Conclusions: The court concluded that the principle of restitution did not apply, given the specific statutory provisions.

3. SIGNIFICANT HOLDINGS

Preserve Verbatim Quotes of Crucial Legal Reasoning: "Interest under Section 11BB of the Act becomes payable on the expiry of a period of three months from the date of receipt of the application under Sub-section (1) of Section 11B of the Act."
Core Principles Established: The judgment reaffirmed that interest on refunds under the Central Excise Act is governed by specific statutory provisions, not equitable principles like restitution.
Final Determinations on Each Issue: The court dismissed the petition, upholding the application of Sections 11B and 11BB and rejecting the petitioner's claim for interest from the date of deposit.

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