2018 (12) TMI 498 - AT - Central Excise

Interest on delayed refund - Refund of duty paid in excess - calculation of relevant date - the amount of said refund which got initially adjusted against the outstanding liability of the appellant, if subsequently that liability is set aside, the said period of 3 months has to be counted whether from the date of the initial sanctioning order or from the date of doing away the liability qua which the said amount was adjusted? Held that - The period of 3 months under Section 11BB has to reckon from the decision of Tribunal doing way the liability against which part of sanctioned refund was adjusted. Admittedly, the said adjusted amount of ₹ 1,66,322/- has been refunded within 3 months of the said order. Question of levy of any interest does not at all arise. Otherwise also the said amount was adjusted against the liability of paying interest. Seen from this angle also there arises no question of levy of interest on interest. The Larger Bench of this Tribunal in the case of Indian Thermoplastics Pvt. Ltd. V/s. Commission of Customs, Kolkata 2003 (12) TMI 84 - CESTAT, NEW DELHI has held that the applicant is entitled to interest from the date of final order passed by the Tribunal and if the amount is refunded within 3 months of the order of Tribunal, the same will be in consonance with the principle as contained under Section 11BB of CEA, 1944. The Adjudicating Authorities below have committed no error while declining the entitlement of the appellant for interest on the amount sanctioned in its favour - appeal dismissed - decide against appellant

Summary

Issues:
1. Refund claim of duty amounting to ?2,40,000 paid in excess.
2. Adjustment of refunded amount against outstanding arrears of interest.
3. Claim for interest on the delayed refund.

Issue 1: Refund Claim of Duty Amounting to ?2,40,000 Paid in Excess
The appellant, engaged in the manufacture of chewing tobacco, filed a refund claim for duty paid in excess amounting to ?2,40,000 for the period from 13.04.2010 to 30.04.2010. The refund was sanctioned but only ?73,678 was refunded in cash, with the remaining amount adjusted against outstanding arrears of interest. Subsequently, a show cause notice was issued for wrong availment of cenvat credit. An appeal was preferred, and the demand was upheld, except for a reduction in penalty. The appellant then filed a letter claiming a consequential refund of the pre-deposited amount, which was refunded on 09.11.2016. The appellant claimed interest on the delayed refund, which was contested.

Issue 2: Adjustment of Refunded Amount Against Outstanding Arrears of Interest
The appellant's refunded amount was adjusted against outstanding arrears of interest. However, the liability against which the amount was adjusted was subsequently set aside by the Tribunal. The appellant claimed interest on the refunded amount, citing Section 11BB of the Central Excise Act, 1944, which mandates interest payment if a refund is not made within three months of the application. The Department argued that the refund was made within the statutory limit, as the adjusted amount was refunded within three months of the Tribunal's order setting aside the liability.

Issue 3: Claim for Interest on the Delayed Refund
The appellant contended that interest was payable on the delayed refund as per Section 11BB of the Act. The Department argued that the refund was made within the prescribed time limit. The Tribunal held that the refund was made within three months of the order setting aside the liability against which the amount was adjusted. Citing previous judgments, the Tribunal upheld the decision that interest on the refunded amount was not applicable and dismissed the appeal.

In conclusion, the Tribunal dismissed the appeal, upholding the decision that interest on the refunded amount was not payable as the refund was made within the statutory limit of three months after the liability against which the amount was adjusted was set aside. The judgment analyzed the provisions of the Central Excise Act, 1944, and relevant case laws to determine the entitlement to interest on delayed refunds, ultimately ruling in favor of the Department's contention.