2004 (2) TMI 78 - HC - Central Excise

Claim of interest on the refund of Excise Duty - Delay - constitutional validity of Section 11B - Relevant date for computing the period of limitation for making application under Explanation (B)(f) is the date of payment of the Duty - HELD THAT - Reading of Section 11BB together with Section 11B makes the position very clear. Section 11BB unfold, that stage of making payment of refund to any claimant is reached only when order under sub-section (2) of Section 11B is made to that effect instead of transferring the amount of excess Duty to Consumer Welfare Fund. This is so because under the provision of law ordinarily amount of excise Duty claimed by the Excise Dept. has to be transferred to Consumer Welfare Fund. The assessee gets actual refund only when order is made with reference to any of the clause of proviso to sub-section (2) of Section 11B. However, the payment of interest was linked not to the order under Section 11B(2), but with the application required to be made under Section 11-B (1). As discussed above every person who claims a refund is first required to make an application under Section 11B(1) before time limit stated therein from the relevant date. The relevant date defined under Explanation B(f), applicable to present case, is the date of payment of Duty and not the date of determination about excess payment of Duty. Until substituted vide Finance Act, 2000, any claimant, to refund was required to make an application before expiry of six months from the relevant date, which in the case of the petitioners, who did not fall within Clause (a)(e) of Explanation B to Section 11B was the date of payment of Duty. The period for making such applications since Finance Act, 2000 has been enhanced to one year. Therefore, there is no room to link payment of interest with adjudication of excess payment Section 11BB says that if any order under sub-section 2 of Section 11B is passed and the amount is not refunded to applicant within three months from the date of receipt of application under Section 11B(1) liability to pay interest arises. It does not provide for payment of interest on factum of making payment of refund amount within three months from the date of the order passed under sub-section 2 of Section 11B. But clearly creates liability to pay interest with effect from expiry of three months from the date of application. Since we have noticed above that prior to insertion of Section 11BB there was no statutory provision providing for interest on refund of amount of excess Duty if not paid within a specified date, there is no statutory provision providing for interest on non refund of amount of excess duty within a specified period or on specified date until insertion of Section 11BB. In the absence of any statutory provision for payment of interest no mandamus could be issued for payment of interest for the period prior to one provided in Section 11BB. However, Proviso to Section 11BB which makes the provision applicable to pending applications if the refund amount is not paid within three months from the date Finance Bill received assent of the President, the entitlement of the petitioner to claim refund from such date cannot be denied to him. .Accordingly the petition is allowed, the respondents are directed to pay interest on the amount of refund ordered to be paid to the applicant under sub-section 2 of Section 11B with effect form the expiry of three months from the date Section 11BB came into force that is to say w.e.f. 26-5-1995 which is the date of expiry of three months from 26-5-1995, until the date of actual payment. There shall be no order as to costs.

Summary

Issues Involved:
1. Claim of interest on the refund of excess Excise Duty.
2. Application of Section 11B and Section 11BB of the Central Excise Act, 1944.
3. Determination of the relevant date for the commencement of interest liability.
4. Constitutional validity of Section 11B of the Central Excise Act, 1944.

Summary:

1. Claim of Interest on Refund of Excess Excise Duty:
The petitioner sought interest on the refund of Excise Duty paid in excess, which was ultimately found to be refundable and not liable to be transferred to the Consumer Welfare Fund u/s 11B(2) of the Central Excise Act, 1944. The initial applications for refund were made on 3-1-1989 and 21-4-1989, claiming entitlement to a rebate as a 'new industrial undertaking' under Notification No. 36/87. Despite favorable decisions from the Commissioner (Appeals) and CEGAT, the refund was delayed, leading to the current petition for interest on the delayed refund.

2. Application of Section 11B and Section 11BB of the Central Excise Act, 1944:
The petitioner argued that u/s 11B read with Section 11BB, the refund application was made within one year of the date of payment of Duty, and since the refund was not made within three months, interest was due from the expiry of three months from the date of application. The respondents contended that the refund became due only after the CEGAT's order, and interest was payable only for the delay beyond three months from that date.

3. Determination of the Relevant Date for Commencement of Interest Liability:
The court held that the relevant date for determining interest liability is the date of the application for refund, not the date of the final adjudication. The liability to pay interest arises if the refund is not made within three months from the date of the application, as per Section 11BB. The court emphasized that the statutory provisions of Section 11BB, inserted by the Finance Act of 1995, provide a clear basis for interest on delayed refunds.

4. Constitutional Validity of Section 11B of the Central Excise Act, 1944:
The challenge to the constitutional validity of Section 11B was given up during the hearing. The court noted that the insertion of Section 11BB has made a vital difference by providing a statutory basis for imposing liability to pay interest on delayed refunds.

Conclusion:
The court directed the respondents to pay interest on the refund amount from the expiry of three months from the date Section 11BB came into force (26-5-1995) until the date of actual payment. The interest rate shall be as notified by the Board from time to time. The order is to be complied with within two months from the date of receipt of the writ or submission of a certified copy of the order. There shall be no order as to costs.