2023 (2) TMI 437 - AT - Central Excise

Entitlement to interest on refund which was deposited during investigation in the year 1995, before issuanc of SCN - pre-deposit or not - Section 11B and 11BB of Central Excise Act, 1944 - HELD THAT - On identical facts, a co-ordinate bench of the Tribunal in the matter of M/S RATNAMAI METALS TUBES LTD VERSUS C.C.E. S.T. -AHMEDABAD-III 2018 (8) TMI 539 - CESTAT AHMEDABAD has held that although the amount had been paid during the investigation but it shall be considered as payment of duty only. And when this be so, the refund of the duty amount is clearly governed by section 11B ibid and the interest is available under section 11BB and the interest is payable after completion of three months from the date of filing of refund application. From a bare reading of the section 11BB ibid it is clear that the legislature has casted a duty upon the adjudicating authority to decide the claim for refund immediately within three months, failing which the liability for interest starts running after expiry of three months from the date of the application - In the instant matter, if there is any deficiency in the application, the department could have rejected the said application as they are under obligation to decide the application one way or other during the statutory period of three months. When the application for refund has been filed by the appellant on 26.10.2018, three months period has started running from that date itself. Liability for payment of interest after the expiry of three months is statutory and therefore it was a bounden duty of the authority concerned to pay interest after the expiry of the aforesaid period at the rate as specified under section 11BB ibid. The appellant is entitled for the interest on refund after the expiry of three months from the date of application till the date the payment of refund has been made and the order impugned herein is modified to that extent - the authority concerned is directed to calculate and pay the interest on refund to the appellant after the expiry of three months from the date of the application upto the date of refund, within a period of two months from the date of this order - application allowed.

Issues Involved:
1. Entitlement to interest on the refund amount deposited during investigation.
2. Classification of the amount deposited during investigation as pre-deposit or duty.
3. Applicability of Sections 11B and 11BB of the Central Excise Act, 1944, regarding interest on delayed refunds.

Detailed Analysis:

1. Entitlement to Interest on Refund Amount Deposited During Investigation:
The appellant sought interest on the refund of Rs. 24,15,435/- deposited during an investigation in 1995. The Commissioner (Appeals) rejected the claim, stating that the refund application was incomplete and the deficiency was rectified only on 18.01.2019. Consequently, the refund was sanctioned within three months of the complete application, negating the entitlement to interest.

2. Classification of the Amount Deposited During Investigation as Pre-deposit or Duty:
The appellant argued that the amount deposited during the investigation should be treated as a pre-deposit, thus entitling them to interest from the date of deposit. They cited several judicial precedents to support their claim. Conversely, the Revenue contended that the amount could not be considered a pre-deposit under Section 35F of the Central Excise Act, 1944, and thus Section 35FF was inapplicable. Instead, the amount was deemed Central Excise duty, making Sections 11B and 11BB applicable for interest on delayed refunds.

3. Applicability of Sections 11B and 11BB of the Central Excise Act, 1944:
The Tribunal examined Sections 11B and 11BB, which govern the refund of duty and interest on delayed refunds. Section 11BB mandates interest on refunds if not granted within three months from the date of the application. The Tribunal referenced the case of Ratnamai Metals & Tubes Ltd., which held that amounts paid during investigations are considered duty payments. Therefore, refunds of such amounts are governed by Section 11B, and interest is payable under Section 11BB after three months from the refund application date.

The Tribunal also referenced the Supreme Court decision in Ranbaxy Laboratories Ltd., which clarified that interest on refunds is payable from the date of expiry of three months from the refund application date. The Tribunal noted that the department should have either accepted or rejected the refund application within three months. Since the application was filed on 26.10.2018, the interest liability commenced after three months from this date.

Conclusion:
The Tribunal concluded that the appellant was entitled to interest on the refund amount from the date of expiry of three months from the refund application date (26.10.2018) until the refund payment date. The Tribunal modified the impugned order accordingly and directed the concerned authority to calculate and pay the interest within two months from the date of the order.

Pronouncement:
The judgment was pronounced in open Court on 09.02.2023.

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