2023 (8) TMI 898 - AT - Central Excise

Refund claim as per the section 11 B of the Central Excise Act, 1944 - Compounded levy scheme - HELD THAT - Appellant has opted to carry out his operations in terms of Section 3A of the Central Excise Act, 1944 as inserted by the Finance Act, 1997 read along with the Induction Furnace Capacity Determination Rules, 1997 and Rule 96 ZO of the Central Excise Rules, 1944. The entire proceedings in the matter are in respect of Application for Refund filed by the appellant under Section 11B of the Central Excise Act, 1944 on 06.09.2010. Revenue has throughout treated the application to be made in under Section 11B and even the order dated 19.03.2019 allowed the refund in favour of appellant holding that the refund is to be sanctioned in favour of the appellant as per the section 11 B of the Central Excise Act, 1944 - The present case is not a case for redetermination of duty on the basis of actual production in terms of the Section 3A (4) hence this provision is not applicable for processing the refund application. The Annual Capacity was fixed at 43174.72 MT and the appellant was paying the monthly duty accordingly. After successive round of litigations the capacity as determined by the order dated 21.03.1998 was revised to 32670.848 MT by the order dated 31.12.2010. This refund which has arisen on account of the above revision cannot be said to refund under the provisions of scheme of Section 3A. The order of Commissioner (Appeal) which has been made without taking the note of above facts cannot be upheld. Tribunal has no jurisdiction to prescribe the rate of interest which is prescribed by the Government of India in terms of Notification issue under Section 11BB. The request appellant for interest on the refund will have to be considered only in terms of Section 11BB of the Central Excise Act, 1944 and in the manner as prescribed by the said section. Accordingly the appeal filed by the appellant is to be partly allowed to extent of interest due to them in terms of section 11BB taking the date of filing the application for refund as 06.09.2010. The appeal is partly allowed.

Summary

Issues Involved:

1. Applicability of the compounded levy scheme and general provisions of the Central Excise Act, 1944.
2. Entitlement to interest on refund under the compounded levy scheme.
3. Applicability of the doctrine of unjust enrichment.
4. Determination of the date for calculating interest on delayed refunds.

Summary:

1. Applicability of the compounded levy scheme and general provisions of the Central Excise Act, 1944:

The Tribunal held that the compounded levy scheme is an independent scheme, and general provisions of the Central Excise Act, 1944, are excluded. The Hon'ble Supreme Court in Shri Bhagwati Steel Rolling Mills vs Commissioner of C. Ex [2015 (326) ELT 209 (SC)] supported this by stating that Section 3A does not provide for levying interest, and thus, Rules 96ZO, 96ZP, and 96ZQ cannot impose interest.

2. Entitlement to interest on refund under the compounded levy scheme:

The Tribunal noted that there is no provision under the compounded levy scheme to pay interest on refunds. The case of Commissioner of Income Tax, Gujarat vs Gujarat Fluoro Chemicals [2013 (296) ELT 433 (SC)] clarified that interest on delayed refunds is only payable if the statute provides for it. Hence, the Adjudicating Authority rightly did not allow interest on the refund.

3. Applicability of the doctrine of unjust enrichment:

The Commissioner (Appeal) observed that the doctrine of unjust enrichment is applicable, as the appellant had passed on the duty burden to customers. This was supported by the Hon'ble Supreme Court in Sahakari Khand Udyog Mandal Ltd. [205 (181) ELT 328 (SC)], which stated that no person can enrich inequitably at the expense of another. Thus, the refund claim was subject to the bar of unjust enrichment.

4. Determination of the date for calculating interest on delayed refunds:

The Tribunal emphasized that the date for computing interest on delayed refunds should be from the date of receipt of the application for refund, i.e., 06.09.2010. This is in line with Section 11BB of the Central Excise Act, 1944, and supported by the Board's Circular No 1063/2/2018-CX dated 16.02.2018. Consequently, the appeal was partly allowed to the extent of interest due in terms of Section 11BB, taking 06.09.2010 as the date of filing the application for the refund.

Conclusion:

The appeal was partly allowed, granting interest on the refund from 06.09.2010, in accordance with Section 11BB of the Central Excise Act, 1944. The Tribunal upheld the compounded levy scheme as an independent scheme, excluded general provisions, and applied the doctrine of unjust enrichment.