1995 (11) TMI 104 - HC - Central Excise

Summary

Issues:
1. Refund of excess excise duty paid on Electro Static Precipitator (ESP).
2. Denial of refund by the Assistant Collector of Central Excise.
3. Jurisdictional issue regarding examination of essential characteristics of ESP.
4. Delay in refund and interest rate applicable.

Detailed Analysis:
1. The petitioner ordered Electro Static Precipitator (ESP) from Bharat Heavy Electricals Ltd. (BHEL) at a concessional rate of duty at 5% ad valorem. BHEL cleared the ESP at 15% ad valorem as the necessary certificate from the Ministry of Environment was awaited. Subsequently, the Ministry clarified the duty rate to be 5%, leading to a refund claim of excess duty paid by BHEL. The Assistant Collector rejected the refund claim citing unjust enrichment. The petitioner, who paid the duty, filed a refund claim as per Section 11B. The Collector of Central Excise (Appeals) held in favor of the petitioner, directing the examination of essential characteristics of ESP. The subsequent rejection by the Assistant Collector was challenged, citing a circular allowing concessional rate for knocked down ESPs. The court directed a refund of Rs. 27,74,339/- with interest at 15% per annum.

2. The denial of refund by the Assistant Collector on the grounds of pending appeal by the Department was deemed unfair and illegal. The court emphasized that the Appellate Authority's order is binding unless suspended, and the lack of a stay order allowed for the refund. The Department's denial based on pending appeal was criticized as harassment, especially considering the circular making the knocked down ESP eligible for concessional duty. The court highlighted the Department's obligation to act fairly and refund the lawfully entitled amount promptly, rejecting the Department's inconsistent treatment of assessees.

3. The jurisdictional issue arose from the direction to examine the essential characteristics of ESP under Rule 2(a) of the Central Excise Tariff Act, which was deemed beyond the 2nd respondent's authority. The court held that the examination was without jurisdiction and emphasized the binding nature of the circular issued under Section 37B, making the denial of refund unjustified. The court criticized the Department's coercive recovery actions post-adverse orders while delaying legitimate refunds, emphasizing the need for consistent and fair treatment.

4. The delay in refund despite the Appellate Authority's order dated 14-10-1994 prompted the court to direct the Assistant Collector to refund the amount with interest at 15% per annum within one month. The court deemed the petitioner entitled to the refund and criticized the Department's unfair attitude in denying legitimate refunds. The interest rate was set at 15% per annum in line with Section 11BB, rejecting the petitioner's claim for 18% interest as excessive. The court granted the writ petition, directing the refund and dismissing related applications with costs awarded to the petitioner.