2020 (6) TMI 60 - AT - Central Excise

Refund of amount/duty paid during investigation alongwith interest - amount was paid under protest - section 11B of Central Excise Act, 1944 - period of closure of the factory as the respondent was engaged in manufacturing and packing of Jarda Scented Tobacco - HELD THAT - There are no merit in the observation of the ld. Commissioner (Appeals) in allowing the rejected amount of ₹ 29,81,483/- when the respondent himself withdrew the refund claim in absence of documentary evidence of payment of duty for the period from July, 2015 to January, 2016. Since, the said amount was withdrawn by the respondent the adjudicating authority has no occasion to examine its admissibility and record a finding in this regard. The Commissioner (Appeals) finding that the respondent would have paid the duty during the closure of the factory is based on extraneous factors, and thus de hors the records of the case and accordingly devoid of merit, hence unsustainable in law - the finding of the ld. Commissioner (Appeals) allowing the said refund amount is devoid of merit and accordingly set aside. Interest on deposit - relevant date - HELD THAT - Till the time the show cause notice is adjudicated, the amount paid by the respondent cannot be said to have attained finality and refundable to them. The Tribunal directed the return of the said amount deposited by the respondent during investigation in all fairness attributable to inordinate delay of adjudication of the Show Cause Notice issued by the department. Needless to emphasize it is an interim measure caused to mitigate the hardship to the respondent for the delay in adjudication by the department. But, that does not mean that respondent can retain the said amount even if the issue of classification is decided against them - the ld. Commissioner (Appeals) order directing payment of interest from the date of deposit of the said amount is also devoid of merit and accordingly set aside. Appeal allowed - decided in favor of Revenue.

Summary

Issues Involved:
1. Whether the refund amount of ?29,91,483/- is correctly allowed to the Respondent.
2. Whether interest on the total refund amount of ?15,61,27,257/- is payable to the respondents from the date of its deposit.

Issue-wise Detailed Analysis:

1. Refund Amount of ?29,91,483/-:
The Revenue challenged the Commissioner (Appeals)'s decision to allow the refund of ?29,91,483/- to the respondent. The respondent had initially withdrawn this claim due to the lack of documentary evidence supporting the payment of this amount. The Commissioner (Appeals) allowed the refund, citing that the amount was related to duty payment for days when the factory was closed. However, the Tribunal found no merit in this observation, noting that the respondent's withdrawal of the claim meant the adjudicating authority had no opportunity to verify its admissibility. Consequently, the Tribunal set aside the Commissioner (Appeals)'s finding, deeming it extraneous and unsustainable in law.

2. Interest on Total Refund Amount of ?15,61,27,257/-:
The Tribunal examined whether interest on the refund amount should be paid from the date of deposit. The respondent had deposited the differential duty during an investigation, and a show-cause notice issued on 01.07.2016 regarding misclassification and differential duty was still pending adjudication. The Tribunal noted that until the show-cause notice is adjudicated, the deposited amount cannot be considered final or refundable. The Tribunal emphasized that the return of the amount was an interim measure to mitigate hardship due to the delay in adjudication. Therefore, the Commissioner (Appeals)'s order directing interest payment from the deposit date was set aside as devoid of merit.

Additional Observations:
The Tribunal reiterated that refunds under taxing statutes must adhere to the provisions of the respective statutes, referencing the Supreme Court's decision in Mafatlal Industries. The Tribunal also highlighted that interest on refunds is governed by Section 11BB of the Central Excise Act, 1944, which provides for interest from three months after the refund claim date. Since the present case involved amounts deposited during an investigation, not pre-deposits under Section 35F, the refund process had to follow Section 11B and Section 11BB provisions.

Concurring Opinion:
The concurring Member (Technical) emphasized that refunds must comply with statutory provisions, referencing the Supreme Court's decisions and relevant circulars. The Member reiterated that interest on refunds should be calculated from three months after the final disposal of the matter, aligning with established legal precedents.

Conclusion:
The Tribunal set aside the impugned order, allowing the Revenue's appeal and disposing of the stay application. The Tribunal's decision underscores the importance of adhering to statutory provisions and established legal principles in refund and interest matters under the Central Excise Act, 1944.