2000 (11) TMI 460 - AT - Central Excise

Issues Involved:
1. Entitlement to interest on delayed refund of pre-deposit.
2. Jurisdiction of CEGAT to award interest on delayed refunds.

Detailed Analysis:

1. Entitlement to Interest on Delayed Refund of Pre-Deposit:
The appellants, M/s. Sachin Textiles Pvt. Ltd., initially deposited Rs. 5 lakhs as a precondition for the hearing of their appeal. After the appeal was allowed, they requested a refund of the pre-deposit. The jurisdictional Assistant Commissioner rejected the claim on the ground of limitation, but the Commissioner (Appeals) set aside this order, stating that the amount deposited pursuant to CEGAT's order would not fall under the provisions of Sec. 11B of the Central Excise Act, 1944. After further correspondence, the refund was sanctioned, but the appellants then requested interest on the belated refund, which was dismissed by the Assistant Commissioner and upheld by the Commissioner (Appeals) on the grounds that it was not covered under Sec. 11BB of the Act.

Similarly, in another case, the appellants deposited Rs. 10 lakhs as a precondition for hearing their appeal, which was later allowed. They requested a refund of the pre-deposit, which was sanctioned, but their demand for interest on the delayed refund was rejected by the jurisdictional Assistant Commissioner, leading to the present appeal.

2. Jurisdiction of CEGAT to Award Interest on Delayed Refunds:
The appellants relied heavily on various decisions by different Benches of the Tribunal where interest was awarded under similar circumstances. Some cited cases include:
- ITC Bhadrachalam Paper Boards Ltd. v. CCE, Hyderabad
- Sawhney Export House (P) Ltd. v. CC, New Delhi
- Konark Cement & Asbestos Ltd. v. CCE

However, contrary to these decisions, there are judgments by the Tribunal and High Courts holding that the power to award interest does not vest in CEGAT. For instance, in the case of Skantrons (P) Ltd. v. CC, New Delhi, the Tribunal held that it could not grant interest on belated refunds as it was a creature of the statute and could not go beyond the provisions of the parent Act.

The Orissa High Court in C.C. Ex. & Cus. v. Golden Hind Shipping (India) Pvt. Ltd. examined whether the power to make such orders arose from Sec. 129B(1) of the Customs Act, which allows the Appellate Tribunal to pass orders as it thinks fit. The High Court concluded that the powers vested in the Income Tax Appellate Tribunal were broader than those vested in CEGAT, and thus, CEGAT did not have inherent power to award interest.

Similarly, the Allahabad High Court in Prestige Engineering (India) Pvt. Ltd. v. U.O.I. held that the Act and the Rules did not provide for payment of interest in case of refund of duty, and the authorities under the Act, including the CEGAT, had no power to award interest.

The Supreme Court in U.O.I. v. E. Merck (India) also reviewed the writ jurisdiction of High Courts on equitable grounds and their awarding of interest, emphasizing that the authority to make orders directing payment of interest must arise from the statute.

Conclusion:
The Tribunal concluded that for making orders directing payment of interest, the authority must arise from the statute, and since CEGAT is a creature of the statute, it is not vested with this authority in the absence of specific delegation. The Tribunal also examined Rules 40 and 41 of the CEGAT (Procedure) Rules, 1982, which enable the Tribunal to make necessary orders to give effect to its decisions. However, the Tribunal found that these rules did not bridge the gap arising from the language of Sec. 129B(1) of the Customs Act or Sec. 35 of the Central Excise Act.

Given the conflicting judgments and the importance of the issue, the Tribunal requested the Hon'ble President to constitute a Larger Bench to settle the matter. The Registry was directed to transfer the papers to the Central Registry at Delhi for further proceedings.

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