2021 (1) TMI 1024 - AT - Central Excise

Interest on ineligible modvat credit - Recovery of erroneous Refund - disallowance of credit and recovery of same - Department has not issued any SCN proposing to disallow the credit or recover the same - payment of interest to the respondent on the delayed refund amount - delay caused by the respondent in furnishing the details to the department - HELD THAT - As admitted by both sides, the department has not issued any SCN proposing to disallow the credit or recover the same. In the case of erroneous refund, the department could have issued a show cause notice proposing to recover the amount erroneously refunded to the assessee. In a litigation arising out of a refund claim filed by the assessee, the department cannot claim any relief. The demand of interest on the ineligible modvat credit cannot therefore sustain. Further, as per Rule 57I which stood at the relevant period, it is seen that the liability to pay interest will start only after expiry of three months from the date of receipt of demand notice. Since the amount has been appropriated at the time of order of refund itself, as correctly pointed out by counsel for respondent there is no liability to pay interest - the finding rendered by the Commissioner (Appeals) in this regard is legal and proper. Interest on the sanctioned amount - respondent has submitted that they have already received the sanctioned refund - HELD THAT - As per Section 11BB of Central Excise Act, 1944, the assessee is eligible for interest on the amount from three months from the date of filing the refund claim. In the present case, the date of filing refund claim is on 05.11.2007. The argument of the department that there was delay on the part of the respondent to furnish details with regard to modvat credit and therefore the delay has occurred due to the negligence on the part of the respondent is not tenable. If there was undue delay on the part of respondent, the department could have rejected the refund claim for this reason - the respondent is eligible for interest under Section 11BB - there are no error in the order passed by Commissioner (Appeals) with regard to this issue also. Appeal dismissed - decided against Revenue.

Summary

Issues:
1. Whether the department is entitled to demand interest on ineligible modvat credit availed by the respondent?
2. Whether the respondent is eligible for interest on the sanctioned refund amount under Section 11BB of the Central Excise Act, 1944?

Analysis:

Issue 1:
The department contended that interest should be paid on the ineligible modvat credit of ?45,95,344. The Commissioner (Appeals) held that since no show cause notice was issued proposing to disallow the credit, the demand for interest on the ineligible credit cannot be sustained. As per Rule 57I, interest liability arises only after three months from the date of receipt of demand notice. Since the amount was appropriated at the time of the refund order, there is no obligation to pay interest. The Tribunal agreed with the Commissioner (Appeals) that the finding was legal and proper, dismissing the department's argument.

Issue 2:
The department argued that they were not liable to pay interest on the sanctioned refund of ?29,41,926. The respondent had received the refund, and as per Section 11BB, interest is payable from three months after the refund claim filing date. The department claimed delay by the respondent in providing credit details, but the Tribunal found this argument untenable. The Tribunal held that the respondent was entitled to interest under Section 11BB, rejecting the department's contention of negligence on the part of the respondent. The order passed by the Commissioner (Appeals) on this issue was upheld.

In conclusion, the Tribunal found the department's appeal lacking in merit and dismissed it. The respondent was deemed eligible for interest on the sanctioned refund amount under Section 11BB of the Central Excise Act, 1944.