2024 (7) TMI 7 - AT - Central Excise

Interest on refund claim u/s 11BB of Central Excise Act, 1944 - relevant time - interest on refund has to be calculated from expiry of three months after passing of the Tribunal s final order or it has to be calculated from the date of final order of the Tribunal - rate of interest - rate of interest should be 6% or 15% or any other rate - entitlement for interest on interest. Whether the appellant is entitled to get interest under Section 11BB of Central Excise Act, 1944? - HELD THAT - Hon ble Supreme Court also in the case of COMMISSIONER OF CUSTOMS (IMPORT) , RAIGAD VERSUS M/S. FINACORD CHEMICALS (P) LTD OTHERS 2015 (5) TMI 371 - SUPREME COURT while discussing the liability of the department to pay the interest has referred to Departments' own circular dated 02.01.2002 wherein the Board clarified that the matters of refund other than the amount of duty would not be covered under the provisions of Section 11B of Customs Act or Section 35FF of Central Excise Act. It was held by the Hon'ble Apex Court that in such cases of refund even the concept of unjust enrichment is not applicable. Once it is clear that Section 11B and 11BB of Central Excise Act will not be applicable to the amount in question, the denial of the interest on the appellant s amount is held to be unjustified. As per the Article 300A of Constitution of India also, no person shall be deprived of his property, save by authority of law. He cannot be deprived of the same and is entitled for benefits arising out of said property. Hence interest accrued on the amount in question during the period it remained deposited with the department is the property of the owner of the amount i.e. the appellant herein - the appellants are entitled to claim the interest on the amount as has been refunded in their favour that too to be paid from the date of payment of initial amount till the date of its refund. Rate at which the such interest has to be awarded - HELD THAT - The amount in question was an amount in the form of pre-deposit. Hence, it is the refund in terms of Section 35FF. However, the interest on sanctioned amount of refund has been denied on the ground that refund has been sanctioned within three months from the date of communication of the order of appellate authority in terms of the pre amended Section 35FF of Central Excise Act, 1944. The findings of the order under challenge are hereby set aside. The appellant is held entitled to have interest on the amount of refund sanctioned at the rate of 12% per annum since the amount was got deposited after denying the substantial benefit of MODVAT - the appellant is eligible for interest at the rate of 12% from the date of the deposit of the amount till the date of refund thereof - appeal allowed.

Summary

Issues Involved:
1. Calculation of interest on refund.
2. Applicable rate of interest.
3. Entitlement to interest on interest.

Issue-wise Detailed Analysis:

1. Calculation of Interest on Refund:
The appellant, M/s. Modern Threads India Limited, filed a refund claim of Rs. 51,26,639/- on 17.11.2020, later adjusted to Rs. 51,17,454/-. The claim was pursuant to orders from the Rajasthan High Court and other authorities. However, the refund was proposed to be rejected as time-barred, alleging it should have been filed within one year from the High Court's order dated 09.05.2018. Initially rejected, the matter was remanded by the Commissioner (Appeals) for reconsideration. The adjudicating authority sanctioned the refund, holding that the clause of unjust enrichment was not applicable.

2. Applicable Rate of Interest:
The appellant contended that interest on the refund should be calculated from the date of the Tribunal’s final order and at a rate of 12% per annum. The Tribunal referred to multiple precedents, including the cases of Bochasanwasi Shri Aksharpurushottam Swaminarayan Sansth and Parle Agro Pvt. Ltd., which supported the appellant's claim. The Tribunal noted that the rate of interest varies between 6% to 18% as per different notifications under the Central Excise Act. The Tribunal decided that 12% per annum was appropriate, drawing support from several judgments, including those of the Supreme Court and High Courts.

3. Entitlement to Interest on Interest:
The Tribunal held that the appellant was entitled to interest on the refund amount from the date of deposit until the date of payment. This was based on the principle that no person should be deprived of their property without authority of law, as per Article 300A of the Constitution of India. The Tribunal cited the Supreme Court's decision in Sandvik Asia Ltd., which established that interest on delayed refunds should be compensated. The Tribunal also referenced other cases, such as RHL Profiles Ltd. and Union of India vs. M P Desal, which supported the payment of interest on retained amounts.

Conclusion:
The Tribunal concluded that the appellant was entitled to interest on the refund amount at a rate of 12% per annum from the date of deposit until the date of refund. The order under challenge was set aside, and the appeal was allowed, affirming the appellant's right to interest on the refunded amount. The decision emphasized the need for fair compensation for the delay in refunding the appellant's money, aligning with established legal principles and precedents.

[Order pronounced in the open court on 28.06.2024]