2016 (3) TMI 305 - AT - Central Excise

Interest on delayed payment of interest - Held that - Regarding the interest, we find that for the first time the legal provision for payment of interest on refund was introduced in the law only on 26.05.1995 through Finance Act, 1995. In the absence of any provision prior to that date the appellant s plea for payment of interest for the prior period cannot be sustained. Similarly, we find that there is no provision for payment of interest on interest in the Central Excise Act or Rules made there under Sanction of a part of the refund amount by way of credit in the cenvat account - Held that - We find that the appellants have made out a case in their favour. It is seen that in the impugned order, the ld. Commissioner (Appeals) also categorically recorded that refund of duty paid through modvat account is to be given in cash only, when the assessee concerned is not in a position to utilize the credit. We find in the present case the appellants are operating under small scale exemption scheme and it is recorded that in the end of the year they are reversing the available credit in their books in order to avail SSI exemption. Considering this position, granting refund and crediting it to the modvat account will not in effect allow the appellant to utilize the fund which was collected and kept by the Government in excess of legal due. Under these circumstances, we find the refund sanctioned already is to be given in cash and to that extent, we modify the impugned order and dispose of the present appeal.

Issues:
1. Claim for refund of excess payment of duty.
2. Payment of interest under Section 11 BB of the Central Excise Act, 1944.
3. Eligibility for interest on delayed payment of interest.
4. Refund in full by cash for small scale unit.
5. Restoration of amount collected without authority of law.
6. Crediting refund amount in cenvat account.

Analysis:

1. Claim for refund of excess payment of duty:
The appellants, engaged in the manufacture of oxygen and ethylene gas, filed a claim for refund of excess duty paid in the year 1988-89. The refund was sanctioned by the Original Authority, with a portion paid by cheque and the rest credited in the cenvat account. The appellants appealed against this order, leading to the present appeal.

2. Payment of interest under Section 11 BB of the Central Excise Act, 1944:
The ld. Commissioner (Appeals) ordered for payment of interest under Section 11 BB from 27.08.1995 till the date of refund. However, he held that no interest is payable on the delayed payment of interest. The Tribunal found that interest on refund was introduced in the law only on 26.05.1995, and there is no provision for payment of interest on interest.

3. Eligibility for interest on delayed payment of interest:
The appellant claimed interest on the delayed payment of interest, arguing that the amount collected without authority of law should be restored back to them with interest from the date of improper recovery. However, the Tribunal held that there is no provision for interest on interest in the Central Excise Act.

4. Refund in full by cash for small scale unit:
The appellant contended that as a small scale unit, they should have received the refund in full by cash, as they were not able to utilize all the credit in their accounts. The Tribunal agreed, noting that the refund should be given in cash if the appellant is unable to utilize the credit.

5. Restoration of amount collected without authority of law:
The appellant argued that the amount claimed as refund was collected and retained by the Department without authority of law, and should be restored back to them with interest. The Tribunal found that there is no provision for interest prior to 27.08.1995, and the interest shall be due after 3 months of the availability of such provision.

6. Crediting refund amount in cenvat account:
The Tribunal found that the appellants, operating under a small scale exemption scheme, should receive the refund in cash as they were not in a position to utilize the credit. The Tribunal modified the impugned order to grant the refund in cash, considering the appellants' inability to utilize the credit effectively.

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