2023 (5) TMI 93 - HC - Central Excise

Entitlement to interest on delay payment of refund, once the Tribunal has decided to refund the pre-deposit amount - HELD THAT - This aspect has been considered by this Court in M/S SHREEWOOD PRODUCTS PVT. LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE 2016 (10) TMI 273 - PUNJAB AND HARYANA HIGH COURT . In that case, application for refund was made on 22.05.2008. Part of some amount i.e. Rs.76,44,080/- was refunded in the month of January, 2009, whereas the remaining amount of Rs.88,72,686/- was refunded in the month of April, 2009. Reference was made to a circular issued by the Government of India on 02.01.2002, which provided that formal application for refund was not required. A simple letter from the person is sufficient along with copy of the order, on the basis of which, the refund became due, which can be considered by the competent authority to refund the claim. Since the application, in that case, was made on 22.05.2008, the assessee was entitled to 12% interest per annum for the period after three months till the refund was granted after passing of the order by the Tribunal on 02.05.2008. The High Court of Kerala, in SONY PICTURES NETWORKS INDIA PVT. LTD. VERSUS THE UNION OF INDIA, THE COMMISSIONER OF CUSTOMS AND CENTRAL EXCISE, THE ASSISTANT COMMISSIONER OF CUSTOMS, THIRUVANANTHAPURAM 2017 (5) TMI 864 - KERALA HIGH COURT was examining a case, where the assessee was liable to pay refund amount on expiry of three months from the date of order dated 18.11.2002 passed by the Appellate Tribunal. It was held that even if the application was submitted late, the circulars dated 02.01.2002 and 08.12.2004 issued in respect of refund/return of deposits do not restrict payment of interest from the date of submission of application. In the present case, since the amount was deposited under Section 35F of the Central Excise Act, even a simple application could be made for claiming the refund and the refund was required to be returned along with interest - With respect to the interest, the judgments passed in Shreewood Products Pvt. Ltd. and Sony Pictures Networks India Pvt. Ltd. s cases have clarified that the department is liable to make payment of interest after the expiry of three months from the date the refund becomes due - In the present case also, after the expiry of three months, the interest became due w.e.f. August, 2010. The appellant is held entitled to payment of interest at the rate of 12% per annum for the period after three months till the refund was granted after passing of the order by the Tribunal on 26.05.2010 - appeal allowed.

Summary

Issues involved: Appeal against the rejection of refund claim under Section 35FF of the Central Excise Act, 1944 on the ground of limitation and denial of interest on the refund claim.

The appellant, a company engaged in the manufacture of footwear, challenged the rejection of its refund claim by the Commissioner Central Excise. The Tribunal had earlier set aside the demand made by the authority and directed the appellant to make a pre-deposit under Section 35F of the Act. The Tribunal allowed the appeal and set aside the demand, leading to the appellant filing a refund claim. The Commissioner rejected the refund claim on the basis of being filed after the expiry of one year from the Tribunal's order. The appellant appealed against this decision, which was dismissed by the Commissioner (Appeals) on the ground of limitation under Section 11B of the Central Excise Act, 1944. The Tribunal allowed the appeal to the extent of refund of the pre-deposit, but denied interest on the claim, citing a previous decision and the issuance of a show cause notice within three months of the refund claim. The appellant challenged this denial of interest in the present appeal.

The appellant argued that the Tribunal's reliance on a specific case was not applicable to the present situation and referred to various judgments, including a circular simplifying refund procedures. The respondent contended that the Tribunal's decision was appropriate based on the previous case law. The Court considered the facts and arguments presented by both parties.

The Court analyzed the previous case cited by the Tribunal, which involved the denial of interest on a refund claim made within three months of becoming due. In the present case, the pre-deposit was made in 1998 and the refund claim was filed in 2011, with the Tribunal's order allowing the refund in 2010. The Court discussed the entitlement to interest on delayed refund payments and referred to previous judgments highlighting the obligation to pay interest after three months from the due date of the refund. The Court also referenced a government circular clarifying refund procedures.

In conclusion, the Court held that the appellant was entitled to interest at the rate of 12% per annum for the period after three months until the refund was granted. The appeal was allowed accordingly.