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TMI Blog2024 (9) TMI 129X X X X Extracts X X X X X X X X Extracts X X X X ..... ignificance in the facts of the present case and which was succinctly explained and acknowledged by the Supreme Court in SOUTH EASTERN COALFIELDS LTD. VERSUS STATE OF M.P. ORS. [ 2003 (10) TMI 638 - SUPREME COURT ] where it was held that ' Once the doctrine of restitution is attracted, the interest is often a normal relief given in restitution. Such interest is not controlled by the provisions of the Interest Act of 1839 or 1978.' The respondents is liable to pay interest from the date of the moving of the original application on 24 June 2016. The said interest would flow up to 29 November 2018 when refunds were ultimately effected - petition allowed. - HON'BLE MR. JUSTICE YASHWANT VARMA AND HON'BLE MR. JUSTICE RAVINDER DUDEJA For the Petitioner Through: Mr. Tarun Gulati, Sr. Adv. with Mr. Kishore Kunal, Ms. Diva Deversha and Mr. Anuj Kumar, Advs. For the Respondents Through: Mr. Anurag Ahluwalia, CGSC along with Mr. Hridyanshi Sharma, Adv. for R-1/UOI. Ms. Sonu Bhatnagar, SSC along with Ms. Nishtha Mittal, Ms. Apurva Singh and Ms. K.S. Mary Jonet, Advs. for R-2 R-3. JUDGMENT YASHWANT VARMA, J. (ORAL) 1. The writ petitioner has approached this Court being aggrieve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... No. 12/2012 CE dated 17.03.2012 (as amended)-reg. Please to the subject mentioned above. 2. In this regard, it is to inform that this Commissionerate had received applications from the importer M/s Jaina Marketing Associates regarding reassessment of Bills of Entry @1% CVD under Si. No. 263A of Notification No. 12/2012-CE dated 17.03.2012 (as amended) in view of Order in appeal No. CCC(A) CUS/D-l/IMP/298 to 440/2016 dated 26:05.2015, passed by Shri Ashutosh Baranwal, Commissioner of Customs (Appeals), Order-in-Appeal No. CCC(A) CUS/p-l/IMP/638 to 737/2016 dated 26.08.2016 and Order in Appeal No. CCC(A) CUS/D-l/IMP/743/ to 805/2016 dated 05.09.2016 passed by Shri J.R. Panigrahi, Commissioner of Customs (Appeals) (Copies enclosed). The above Orders in Appeal have extended the benefit of Notification No. 12/2012-CE dated 1.7.03.2012 Si. No. 263A (as amended) to the importer. 3. However. During re-assessment it has been noticed chat the system does not accept Si. No. 263A of the Notification no. 12/2012-CE dated 17.03.2012. This benefit needs to be extended to Importers owing to the Supreme Court judgment in the SRF case (CA no. 9440 of 2003-judgment dated 25.03.2015)-The review petiti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... down in SRF Ltd., consistently denying benefits of the notification to assessees on the ground that no CENVAT credit on inputs and capital goods was admissible to assessees for manufacture of mobile phones since they were imported as opposed to being manufactured. 5. Taking note of the aforesaid stand, the Court in Telecare I ultimately held as follows:- 6. It is submitted that following the judgment in the case of Ashok Traders v. Union of India 1987 (32) ELT 262 (Bom) of the Bombay High Court, it was held that the condition which could not be satisfied and had to be treated as not satisfied. In the case of SRF Limited (supra) decided on 26.03.2015, dealing with similar issue as to whether the assessee is entitled to the benefit of Notification No. 12/2012 CE, the Court held that the I assessee was entitled to exemption from payment of CVD in view of the law already declared in the cases of Thermax Private Limited v. Collector of Customs (Bombay), New Customs House 1992 (4) SCC 440; Hyderabad Industries Ltd. v. UOI 1999 (5) SCC 15; AIDEK Tourism Services Private Limited v. Commissioner of Customs, New Delhi 2015 (7) SCC 429 that for quantification of additional duty in the case o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the instant case. In this respect, we would like to draw reference from the decision of Hon'ble Supreme Court in the case of Union of India and Others vs. I.T.C. Limited, 1993 Supp (4) SCC 326, wherein it has been held that any money which is realized in excess of what is permissible in law would be a realization made outside the provisions of the Act. Thus, any amount paid in excess of what was payable is outside the ambit of law. 6. In Telecare I, the respondents appear to have taken the stand that since the petitioner had consciously paid the duty, the deposit of amounts would not be liable to be viewed as being contrary to law. It also appears to have been asserted that the application for refund was filed beyond the period prescribed under Section 27 of the Customs Act, 1962 [1962 Act]. 7. This is evident from a reading of para 9 of the report which is extracted hereinbelow:- 9. The Revenue points out that the petitioner paid the duty consciously and after deliberation; therefore, the deposit of amounts towards duty were not contrary to law. Therefore, consequent action had to be undertaken by it within limitation prescribed under the Act. Its inaction in filing the refund ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o make a declaration for availing CENVAT credit had already come to be duly declared and enunciated by the Supreme Court in SRF Ltd., and which judgment had come to be pronounced on 26 March 2015. It appears that realizing the mistake committed in making deposits towards CVD at the rate of 12.5% led to the petitioner filing a refund application on 24 June 2016. That application had come to be rejected on 07 March 2017 and which formed subject matter of challenge in the first writ petition. 10. However, and post the judgment handed down by this Court on 06 August 2018, the petitioner filed another application on 23 October 2018 requesting the respondents to process its claim for refund. It was acting upon the said application that the principal amount was refunded on 29 November 2018. 11. It is also pertinent to note that the respondents while passing the impugned order do not dispute the entitlement of the petitioner to the refund of the principal amount as would be evident from the following extracts of that order:- 7f. In view of the above I find that the party was liable to pay CVD @ 1% in terms of S.No. 263 A of the Notification No. 12/2012-CE dated 17.03.2012, as amended, read ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... om such date, there shall be paid to the applicant interest under this section from the date immediately after three months from such date, till the date of refund of such duty. Explanation : Where any order of refund is made by the Commissioner (Appeals), Appellate Tribunal [, National Tax Tribunal] or any court against an order of the [Assistant Commissioner of Customs or Deputy Commissioner of Customs] under sub-section (2) of section 27, the order passed by the Commissioner (Appeals), Appellate Tribunal [, National Tax Tribunal] or, as the case may be, by the court shall be deemed to be an order passed under that sub-section for the purposes of this section.] 13. Before us, Ms. Bhatnagar learned counsel appearing for the respondents contended that there was no delay caused by the respondents in attending to the claim for refund since the application made on 23 October 2018 after the judgment rendered by this Court, was disposed of on 14 November 2018 itself and thus within three months of the making of the said application as statutorily stipulated. 14. It was additionally argued that the interest which is spoken of in Section 27A is liable to be paid on duty that may have been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which has been consistently taken by various High Courts. In Commissioner of Central Excise (Appeals), Bangalore vs. KVR Construction 2010 SCC OnLine Kar 5419, the Karnataka High Court pertinently observed:- 16. We are not concerned with the other conditions of section 11B of the Act because it is not the case of the appellant-Department that the burden of service tax was passed on to any other person. As a matter of fact, the controversy in this appeal revolves around the maintainability of the very application filed under section 11B of the Central Excise Act and whether section 11 applies to the facts of the present case at all. In the case of Mafatlal Industries Ltd. v. Union of India [1998] 111 STC 467 (SC) ; (1997) 89 ELT 247 (SC), the question was with regard to the refund of Central excise and customs duties. It was held that all claims except where levy is held to be unconstitutional, are to be preferred and adjudicated upon under section 11B of the Central Excise Act, 1944 or under section 27 of the Customs Act, 1962 and subject to claimant establishing that burden of duty has not been passed on to a third party. In such circumstances, it was held, no civil suit for refun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... : xxxx xxxx xxxx 20. From the reading of the above section, it refers to claim for refund of duty of excise only, it does not refer to any other amounts collected without authority of law. In the case on hand, admittedly, the amount sought for as refund was the amount paid under mistaken notion which even according to the Department was not liable to be paid. 21. According to the appellant, the very fact that the said amounts are paid as service tax under the Finance Act, 1994 and also filing of an application in form R of the Central Excise Act would indicate that the applicant was intending to claim refund of the duty with reference to section 11B, therefore, now it is not open to him to go back and say that it was not refund of duty. No doubt in the present case, form R was used by the applicant to claim refund. It is the very case of the petitioner that they were exempted from payment of such service tax by virtue of circular dated September 17, 2004 and this is not denied by the Department and it is not even denying the nature of construction/services rendered by the petitioner was exempted from to payment of service tax. What one has to see is whether the amount paid by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order of the Tribunal, the Revenue came up before the High Court. Their Lordships of the Division Bench held that the order of the Tribunal to allow the claim on the basis that amount paid by mistake cannot be termed as duty in the said case was justified and therefore applying the law laid down in the decision of the apex court in the case of India Cements Ltd. v. Collector of Central Excise (1989) 41 ELT 358 dismissed the appeal. 25. Now, we are faced with a similar situation where the claim of the respondent/assessee is on the ground that they have paid the amount by mistake and therefore they are entitled for the refund of the said amount. If we consider this payment as service tax and duty payable, automatically, section 11B would be applicable. When once there was no compulsion or duty cast to pay this service tax, the amount of Rs. 1,23,96,948 paid by petitioner under mistaken notion, would not be a duty or service tax payable in law. Therefore, once it is not payable in law there was no authority for the Department to retain such amount. By any stretch of imagination, it will not amount to duty of excise to attract section 11B. Therefore, it is outside the purview of secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it applies the limitation prescribed under Section 11B of the Act to the present case were admittedly Appellant had paid a service tax on Commercial or Industrial Construction Service even though such service is not leviable to service tax. We are of the view that the decisions relied upon by the Appellate Tribunal do not support the case of the Respondent in rejecting the refund claim on the ground that it was barred by limitation. We are, therefore, of the view that the impugned order is unsustainable. 23. This Court in M/s Om Gems and Jewellery vs. Principal Commissioner of International Customs Ors. 2023 SCC OnLine Del 7932 had an occasion to review the entire body of precedent dealing with the issue of refund in some detail. We deem it apposite to extract the following passages from that decision:- 19. We note that interest has been duly recognized as being a necessary corollary to a wrongful retention of capital. We deem it apposite to extract the following passages from the decision of a Division Bench of the Allahabad High Court in Wig Brother (Builder Engineers) v. Union of India:- 27. It may be mentioned that money doubles in six years (because of interest). In this case, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that there is misconception about interest. Interest is not a penalty or punishment at all, but it is the normal accretion on capital . For example if A had to pay B a certain amount, say 10 years ago, but he offers that amount to him today, then he has pocketed the interest on the principal amount. Had A paid that amount to B 10 years ago, B would have invested that amount somewhere and earned interest thereon, but instead of that A has kept that amount with himself and earned interest on it for this period. Hence, equity demands that A should not only pay back the principal amount but also the interest thereon to B. 21. We further note that the issue of interest being paid on monies unjustifiably retained, albeit in the context of pre-deposits, again fell for consideration of the Supreme Court in Sandvik Asia Ltd. v. CIT . While dealing with the liability of the department to bear that burden in case of unjustified retention of monies, the Supreme Court had observed as follows: 29. In our view, there is no question of the delay being justifiable as is argued and in any event if the Revenue takes an erroneous view of the law, that cannot mean that the withholding of monies is ju ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aid to the appellant on 27-3-1981 and 30-4-1986 due to the erroneous view that had been taken by the officials of the respondents. Interest on refund was granted to the appellant after a substantial lapse of time and hence it should be entitled to compensation for this period of delay. The High Court has failed to appreciate that while charging interest from the assesses, the Department first adjusts the amount paid towards interest so that the principle amount of tax payable remains outstanding and they are entitled to charge interest till the entire outstanding is paid. But when it comes to granting of interest on refund of taxes, the refunds are first adjusted towards the taxes and then the balance towards interest. Hence as per the stand that the Department takes they are liable to pay interest only up to the date of refund of tax while they take the benefit of assesses funds by delaying the payment of interest on refunds without incurring any further liability to pay interest. This stand taken by the respondents is discriminatory in nature and thereby causing great prejudice to lakhs and lakhs of assesses. Very large number of assesses are adversely affected inasmuch as the In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the consideration of a Larger Bench in light of the order passed in Commissioner of Income Tax, Gujarat v. Gujarat Fluoro Chemicals19, we note that while framing that reference the Supreme Court has not doubted the compensatory character of interest that may be imposed in case of unjustified retention of monies of an assessee. Their Lordships doubted the view taken on the facts of Sandvik Asia bearing in mind that advance tax or tax deducted at source loses its identity once it gets subsumed in a demand of tax created in terms of an assessment. 23. A more lucid explanation of the liability to pay interest is found in the decision of the Supreme Court in Union of India v. Tata Chemicals Ltd.20. Highlighting the compensatory element of such interest being provided by courts, the Supreme Court had held as follows: 37. A tax refund is a refund of taxes when the tax liability is less than the tax paid. As per the old section an assessee was entitled for payment of interest on the amount of taxes refunded pursuant to an order passed under the Act, including the order passed in an appeal. In the present fact scenario, the deductor/assessee had paid taxes pursuant to a special order pass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... foresaid precedents is of the State being under a positive obligation to refund monies paid under a mistake or absent a liability lawfully imposed. Taking a position contrary to the above would clearly be in breach of the constitutional ethos underlying Article 265 of the Constitution itself. It would be wholly unjust and arbitrary for the State to retain such moneys especially where there be no dispute with respect to the assessee otherwise being under no statutory obligation to pay the tax or duty. 25. The restitutory element of interest is yet another aspect which assumes significance in the facts of the present case and which was succinctly explained and acknowledged by the Supreme Court in South Eastern Coalfields Ltd. vs. State of Madhya Pradesh Ors. (2003) 8 SCC 648 as under:- 21. Interest is also payable in equity in certain circumstances. The rule in equity is that interest is payable even in the absence of any agreement or custom to that effect though subject, of course, to a contrary agreement (see Chitty on Contracts, 1999 Edn., Vol. II, Para 38-248 at p. 712). Interest in equity has been held to be payable on the market rate even though the deed contains no mention of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es are yet to be heard and determined on merits and if the concept of restitution is excluded from application to interim orders, then the litigant would stand to gain by swallowing the benefits yielding out of the interim order even though the battle has been lost at the end. This cannot be countenanced. We are, therefore, of the opinion that the successful party finally held entitled to a relief assessable in terms of money at the end of the litigation, is entitled to be compensated by award of interest at a suitable reasonable rate for the period for which the interim order of the court withholding the release of money had remained in operation. 29. Once the doctrine of restitution is attracted, the interest is often a normal relief given in restitution . Such interest is not controlled by the provisions of the Interest Act of 1839 or 1978. 26. Accordingly, and for all the aforesaid reasons, we allow the instant writ petition and hold the respondents liable to pay interest from the date of the moving of the original application on 24 June 2016. The said interest would flow up to 29 November 2018 when refunds were ultimately effected. 27. Bearing in mind the facts which emerge fr ..... X X X X Extracts X X X X X X X X Extracts X X X X
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