2016 (9) TMI 787 - HC - Central Excise

Entitlement for interest - refund became due to petitioner after the matter was decided by Tribunal on 14.01.2000 - application submitted by petitioner on 08.03.2000 but for one or other reason, incorrect and illegal orders were passed by Revenue authority and could not defeat in even up to this Court - amount refunded only in 20.01.2006 - Held that - respondents have retained huge money of petitioner without any authority of law and for their own fault are penalising the petitioner by denying due interest on the amount refundable to petitioner. Application for refund was filed by petitioner on 08.03.2000. Under Section 11 BB it is provided that if the authority is satisfied that an amount is to be refunded to Assessee but the same has not been refunded within three months from the date of filing of application, Assessee would be entitled for interest. Order passed by Revenue authority under Section 11B(2) for refund is not relevant for the purpose of attracting interest under Section 11BB but what is said that once refund is found admissible, Assessee if has not been refunded the amount within three months from the date of receipt of application under sub Section (1), he shall be paid interest. Meaning that there is no time limit prescribed for taking a decision about refund but that law makes it very clear that amount if not refunded within three months from the date of receipt of application, interest shall be payable. Even if an order has been passed much later on, for the purpose of interest it will relate back and Assessee would be entitled for interest after three months from the date he has filed application under Section 11B. - Decided partly in favour of petitioner

Summary

Issues:
Classification and rate of tax for the product 'Gulabari'; Refund of excise duty with interest under Section 11BB of the Central Excise Act, 1944.

Analysis:
1. The dispute between the petitioner and the Central Excise Department regarding the classification of the product 'Gulabari' under the Central Excise Tariff Act, 1985 was resolved by the Customs, Excise and Gold (Control) Appellate Tribunal's judgment. The Tribunal held that 'Gulabari' did not fall under Heading 33.03 of the Act.

2. Despite the Tribunal's decision, the Excise Authorities demanded the petitioner to deposit excise duty based on Heading 33.03, resulting in a substantial sum being deposited by the petitioner. The petitioner applied for a refund after the Tribunal's decision, which was initially rejected but later allowed by the Customs, Excise & Service Tax Appellate Tribunal.

3. The Assistant Commissioner, however, refused to refund the amount citing unjust enrichment, a decision upheld by the Commissioner (Appeal). The Tribunal ruled in favor of the petitioner, emphasizing that the authorities had no legal basis to withhold the refund after the Tribunal's decision.

4. The petitioner invoked Section 11BB of the Central Excise Act, 1944, which entitles the Assessee to interest on the refunded amount if not repaid within three months of the application. Despite delays in the refund process due to erroneous orders by Revenue authorities, the refund was eventually made without any interest.

5. The Court highlighted that the authorities were unjustly withholding the refundable amount from the petitioner and penalizing them by denying interest, contrary to legal provisions. Citing precedents, the Court emphasized that no party should benefit from its own wrongdoing.

6. Referring to previous judgments, the Court clarified that interest under Section 11BB becomes payable three months from the date of the refund application, irrespective of the actual refund order date. Therefore, the petitioner was entitled to interest on the delayed refund amount.

7. Consequently, the Court partially allowed the writ petition, directing the respondents to pay interest on the delayed refund amount. The petitioner was also awarded costs amounting to ?25,000.

By analyzing the issues involved in the judgment, it is evident that the Court upheld the petitioner's right to a refund with interest under Section 11BB of the Central Excise Act, 1944, emphasizing the authorities' obligation to adhere to legal provisions and not unjustly withhold refundable amounts.