2020 (3) TMI 998 - AT - Central Excise

Interest on delayed refund - whether the appellant is entitled for interest on the delayed payment of refund either at the rate of 6% or at the rate of 12% of the amount of refund? - Section 11BB of CEA - HELD THAT - Perusal of the section leaves no doubt that the assessee is entitled to interest if the payment had not been paid to him within 3 months of finalization of the claim at such rate as is prescribed under the law. The Section itself records that the interest be given at such rate, which should not be below 5%, nor should be exceeding the rate at 30% per annum - Similar is the intention of Legislature apparent from Section 35FF of Central Excise Act, 1944. Therefore, as per statute itself, the interest rate may vary within the range of rate at 5% to 30%. The notification as relied upon cannot supersede the statute. Keeping in view that the order under challenge is silent about any reason for reducing the rate from 12% to 6% except relying upon the Notification No. 67/2003 it is held that the appellant is entitled for the interest at the rate of 12% - Appeal allowed - decided in favor of appellant.

Summary

Issues:
Claim of abatement of duty for a specific period, rejection of initial claim, entitlement for refund of duty with interest, dispute regarding the rate of interest for delayed refund.

Analysis:
The appeal was filed against the Order-in-Appeal rejecting the appellant's claim of abatement of duty for a particular period. The appellant, engaged in the manufacture of Sada Pan Masala, initially had their claim rejected, but a subsequent Tribunal order entitled them to a refund of duty along with interest for delayed deposit of duty. The Department then sanctioned the refund without interest, leading to an appeal seeking interest at a higher rate.

During the hearing, the appellant's counsel argued for an increase in the interest rate from 6% to 12% based on a High Court decision and a Supreme Court ruling. The Department's representative, however, contended that the prescribed interest rate was already fixed by the Department and that the Tribunals are bound by statutes, unlike the High Court and Supreme Court.

The Tribunal analyzed the issue of whether the appellant was entitled to interest on delayed refund payment at a rate of 6% or 12%. Referring to Section 11BB of the relevant statute, it was observed that interest should be paid at a rate not below 5% and not exceeding 30% per annum, as fixed by the Central Government. The Tribunal noted that the interest rate could vary within this range and that the notification relied upon could not override the statute, especially in light of the Supreme Court's direction in a similar case.

Consequently, the Tribunal held that the appellant was entitled to interest at the rate of 12% based on the statutory provisions and the Supreme Court's clarification. The order was modified accordingly, and the appeal was allowed.