2010 (3) TMI 457 - AT - Customs

Refund of Interest- the respondent herein engaged in the manufacturing of software and were permitted to store duty free imported and indigenously procured goods. Respondent had applied for refund of an amount paid by them after de bonding of their manufacturing facilities. The said refund application was processed by the adjudicating authority and the adjudicating authority came to the conclusion that the respondent has paid an amount of Rs. 4,29,985/- excess than the amount which is liable to be paid by them on de-bonding of their unit. Coming to such conclusion, he sanctioned the refund claim of Rs. 4,29,985/- Rs. 2,23,245/- towards duty and Rs. 2,06,740/- towards interest). Aggrieved by such an order, Revenue filed an appeal before the ld. Commissioner (Appeals). Ld. Commissioner(Appeals) upheld the Order-in-Original. Hence this appeal. Held that- assessee was entitled to its refund even before provision to that effect was introduced w.e.f. 10.05.2008. it was more so as there was no evidence that it was actually payable by assessee, and Revenue could not retain amount collected by them without authority of law.

Summary

Issues:
Appeal against erroneous refund of interest prior to the enactment of Finance Bill, 2008.

Analysis:
1. The appeal was filed by the Revenue against the Order-in-Appeal rejecting their appeal against the Order-in-Original. The respondent, engaged in software manufacturing, applied for a refund after de-bonding their manufacturing facilities. The adjudicating authority found an excess payment of Rs. 4,29,985, which was refunded. The Revenue appealed to the Commissioner (Appeals), who upheld the Order-in-Original, leading to the current appeal.

2. The main contention was the erroneous refund of Rs. 2,06,740 towards interest. The Revenue argued that interest refund was not permissible before 10-5-2008 under Section 11B of the Central Excise Act, 1944. They cited a case to support their argument that interest cannot be claimed if duties were voluntarily paid. The Counsel for the respondent argued that the refunded amount was not just interest but included excess duty collected. The issue revolved around whether interest refund could be granted retrospectively.

3. The Commissioner (Appeals) upheld the refund, stating that the excess payment arose due to the respondent inadvertently paying duties and interest without realizing their entitlement to depreciation. The Commissioner cited judicial precedents to support the refund of interest collected erroneously. It was noted that the amount paid was not legally due, and therefore, had to be refunded. The Commissioner rejected the Revenue's appeal, emphasizing that the impugned order was legal and correct.

4. The Tribunal concurred with the Commissioner's decision, highlighting that the excess payment was made inadvertently and without legal obligation. Referring to the case law cited, the Tribunal upheld the refund, stating that any amount not legally payable cannot be retained by the authorities. The Tribunal concluded that the impugned order was correct and lawful, dismissing the Revenue's appeal and upholding the refund order.

This detailed analysis of the judgment highlights the key arguments, legal principles, and conclusions reached by the authorities involved in the case.