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TMI Blog2013 (11) TMI 512X X X X Extracts X X X X X X X X Extracts X X X X ..... of application till the date for grant of such MODVAT/CENVAT credit. 1.2 The Petitioner was aggrieved by order dated 11.04.2005 passed by the Commissioner, whereby the claim of the petitioner, for interest on the ground that there was no provision empowering the department to pay interest on the MODVAT/CENVAT claim withheld by the Department's inaction, was rejected. 2. The facts, in brief, giving rise to the present petition are as under:- 2.1 M/s. Britco Foods Company Ltd. merged with the Petitioner Company in terms of a scheme of arrangement under Section 391 and 394 of the Companies Act, 1956 duly sanctioned by the High Court of Delhi. An application was made on 20.02.1998 to the Commissioner for transfer of unutilized MODVAT/CENVAT credit on raw materials to the tune of Rs.4,26,896/- as well as on capital goods to the tune of Rs. 4,23,96,092/- of M/s. Britco Foods Company Ltd as on the date of its transfer and merger with the Petitioner Company. 2.2 Despite various reminders and personal representations, no action was taken on the aforesaid application. By a letter dated 27.03.2000, addressed to the Commissioner, the petitioner stated that in view of the sanction of the m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... p; "10. Ongoing through the Central Excise Act and Rules, I find no provision empowering the Department to pay such interest to the assessee. M/s Hindustan Coca Cola Beverages Pvt. Ltd., have cited two cases of M/s Goldstone Engg. Ltd. v/s UOI 2005 (181) ELT 11 (AP) and M/s Hello Minerals Water (P) Ltd. v/s UOI 2004 (174) ELT 422 (All.) wherein the Hon'ble High Courts have held that where duty has been wrongly recovered from the assessee, interest has to be paid to him alongwith refund of duty. However, these cases can be distinguished to the present one as no refund of duty is involved here." 3.1 The petitioner therefore, approached this Court by filing the present petition and challenged the order of the Commissioner, who held that no interest is payable to the petitioner. 4. Learned Senior Advocate Mr. Mihir Joshi with learned Advocate Mr. Tushar Hemani for the petitioner submitted that the respondents have restrained the petitioner from transferring to its account and utilizing a definite amount of MODVAT credit from 1998 till 2003 without any valid cause or reason and therefore, the petitioner is entitled to interest for such wrongful deprivation. Lea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppears to have acknowledged the basic principle involved even in the context of drawback. Even otherwise, we are fortified in our conclusion that the petitioner is entitled to interest on the delayed refund by the decisions of the Hon'ble Supreme Court which recognize generally this principle. iv. In the case of Commissioner of Central Excise vs. M/S. Rajalakshmi Textile Processors (P) Ltd. (2008) 221 ELT 38 (Mad.) Under Modvat credit scheme, duty paid on inputs was allowed to be taken as credit for duty payable on clearance of the final products. The credit taken was nothing but for payment of duty. Thus, Modvat credit is a credit taken on payment of duty which credit could be utilised for the duty payable on the end product. Therefore, the Modvat credit is nothing but the credit available to the assessee on the assessee paying the duty on inputs at the time of clearance of final goods. Hence, credit could be regarded as excise duty available with the assessee for discharging its obligation of payment of duty on final goods. As per Section 11BB, if the refund of duty is not paid within the time stipulated therein, there is a statutory obligation on the part of the Department for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... N NO. & DATE FROM TO 1 10/09/96 02/29/00 20.00% In exercise of the powers conferred by Section 11AB of the Central Excise Act, 1944 (1 of 1944), the Central Board of Excise and Customs hereby fixes the rate of interest at twenty percent per annum for the purpose of the said Section 34/1996-C.E. (N.T.), DATED 09.10.1996. 2 03/01/00 05/11/00 24.00% In exercise of the powers conferred by Section 11AB of the Central Excise Act, 1944 (1 of 1944), the Central Board of Excise and Customs hereby fixes the rate of interest at twenty four percent per annum for the purpose of the said Section 8/2000-C.E. (N.T.), DATED 01.03.2000. 3 05/12/00 05/12/00 24.00% In exercise of the powers conferred by Section 11AB of the Central Excise Act, 1944 (1 of 1944), the Central Board of Excise and Customs hereby fixes the rate of interest at twenty four percent per annum for the purpose of the said Section 40/2000-C.E. (N.T.), DATED 12.05.2000. 4 05/13/02 09/11/03 15.00% In exercise of the powers conferred by Section 11AB of the Central Excise Act, 1944 (1 of 1944), the Central Board of Excise and Customs hereby fixes the rate of interest at fifteen percent per ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Petitioner as contemplated under Rule 57F(20) and 57S(5) of the Central Excise Rule, 1994. The said credit was unlawfully withheld by the respondents without any rhyme or reason. Pursuant to the direction of this Court, directing the respondents to decide the application expeditiously, transfer of credit in respect of raw material was allowed on 09.10.2002 but transfer of credit in respect of capital goods was denied on the ground that such credit was wrongly taken at the stage of initial setting up of the factory and before commencing production. Besides, the request for interest was rejected for want of any statutory provision for payment of interest on amount allowed to be transferred under Rule 57F and 57S of the Central Excise Rules, 1994. Again, it was only after an intervention of this Court, whereby an order was passed directing the Respondent to revise its order in view of the amended provisions of Sub-Rule 2 of Rule 57Q of the Central Excise Rules, 1994 that the request for transfer of credit in respect of capital goods was granted on 09.04.2003 but therein also no order was made as to the claim of interest. It is thereafter that an application was made for grant of in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anted refund by virtue of the order of an appellate authority but it is a case where an amount to which the petitioner was rightfully entitled under the provisions of law was retained without any rationale or reasoning acceptable in law. This Court is thus of the opinion that withholding the transfer of credit on merger was wholly unauthorized and unjustified because the same was done without any lawful consideration and in clear violation of the legal provisions. Since there was a failure on the part of the department in not initiating any proceedings within time limit, the amount to which the petitioner was rightfully entitled was denied to him. The only inescapable conclusion that we can reach is that the respondents had no reason to deny the transfer of the unutilized credit to the petitioner on merger. They had no authority to withhold such amount in law. In that view of the matter, it would be highly unjust to permit the respondents to hold on to the petitioner's money for nearly 5 years without any interest at all as it would amount to Revenue taking advantage of its own wrong of withholding the permission for transfer of credit. 5.4 The contention to the effect that no int ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pondents on the other had relied on the decision of the Hon'ble Apex Court in the matter of Union of India & Ors vs. M/S Upper Ganges Sugar & Industries Ltd. (supra) which can be distinguished on facts. It was a case where the issue was regarding interest on rebate of excess production wherein it was held that in absence of any statutory provision, interest could not have been awarded. The question that whether the assessee was entitled to credit or not was also not free from doubt. It was a question which was bona fide agitated and settled by the Tax Tribunal. It was also not a case where the money had been withheld unjustifiably and therefore the claim was denied on equitable consideration as well. The position is quite different in the case on hand, as in this case an amount to which the petitioner was rightfully entitled was illegally and unlawfully withheld and such retention is found to be unsustainable in law. Thus, the said decision relied upon by the learned counsel for the respondents is found not applicable considering the factual matrix of the present case. 8. Under the circumstances, this Court is of the opinion that the order of the Commissioner disentitling the peti ..... X X X X Extracts X X X X X X X X Extracts X X X X
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