2018 (1) TMI 638 - AT - Central Excise

Refund of interest - Rule 7(4) of the Central Excise Rules, 2002 read with Section 11AB of the Central excise Act, 1944 - Held that - appellants have paid interest in respect of duty paid before the finalization of the assessment. In case duty paid before the finalisation of the assessment, interest is not chargeable - the amount of interest paid by the appellant is refundable to them. Time limitation - Held that - the refund has arisen only after finalization of assessment and before finalization of the assessment there was no ground for the Appellant to file refund as the same would have been held premature. The provisional assessment was finalized on 28.12.2006 and the instant claim was filed on 20.04.2007 which is well within the six months of the finalisation of the assessment, hence the claim cannot be considered to be time barred. Unjust enrichment - Held that - the interest was paid by the appellant on their own and the same not being the part of the price of the goods, question of passing of incidence of the same does not arise - refund not hit by unjust enrichment. Appeal allowed.

Summary

Issues:
Refund claim for interest paid under protest prior to finalization of assessment; Interpretation of Rule 7(4) of CER, 2002; Applicability of Section 11B; Time limit for filing refund claim; Unjust enrichment.

Analysis:
1. The case involved a refund claim by the appellant for interest paid under protest prior to the finalization of assessment. The appellant argued that interest is payable only when the differential duty arising from finalization of provisional assessment is not paid within one month of finalization, as per Rule 7(4). They cited various judgments to support their position, emphasizing that interest is payable only on the determined duty amount post-assessment.

2. The appellant contended that the refund claim was not time-barred as it was filed within six months of the finalization of the assessment. They highlighted that the payment of interest was made under protest, as evidenced by communications with the department, and thus, the refund was not hit by the time limit. Additionally, they argued that the refund of erroneously paid interest was not covered by Section 11B until amended by the Finance Act, 2008.

3. The revenue authority argued that all refunds are covered under Section 11B and that the refund claim filed after one year from the payment of interest was time-barred. They relied on judgments emphasizing the applicability of interest on delayed duty payments and the provisions of unjust enrichment. They contended that there is no provision under Section 11B for refunding interest.

4. The Tribunal examined the submissions and found that interest is not chargeable on duty paid before finalization of assessment, as established by previous judgments. The Tribunal held that the interest paid by the appellant was refundable, even if not under Section 11B, as the amount not payable cannot be retained by the government without legal authority. The Tribunal also noted that the payment of interest was made under protest, further supporting the refund claim.

5. Regarding the limitation, the Tribunal determined that the refund claim was filed within six months of the finalization of the assessment, hence not time-barred. The Tribunal also ruled that in the present case, the refund was not hit by unjust enrichment as the interest was paid by the appellant and was not part of the goods' price. Therefore, the impugned order was set aside, and the appeal was allowed.