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TMI Blog2025 (2) TMI 4X X X X Extracts X X X X X X X X Extracts X X X X ..... etition. All refund claims except those mentioned under Proposition (ii) below have to be and must be filed and adjudicated under the provisions of the Central Excises and Salt Act or the Customs Act, as the case may be. It is necessary to emphasise in this behalf that Act provides a complete mechanism for correcting any errors whether of fact or law and that not only an appeal is provided to a Tribunal - which is not a departmental organ - but to this Court, which is a civil court.' Even if the amount is considered to be refund of deposit then also the same has to be refunded under section 11B as the said section has provided for the refund of deposit lying in account current. All the refunds which are filed under the Central Excise Act, 1944 in terms of the decision of Hon'ble Supreme Court in case of Mafatalal Industries and the above provisions whether of the duty, interest or any deposit made are governed by the provision of Section 11B of the Act. The interest thus gets governed by the provisions of Section 11BB as has been held by Hon'ble Supreme Court in case of Ranbaxy, [2011 (10) TMI 16 - SUPREME COURT]. There has been exception carved out only for determination of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ." Therefore, in the ratio of judgment of the Hon'ble Supreme Court detailed above and the extant legal position, I find that the adjudicating authority was sate the appellant by refunding the said amount along with required to compensate mterest at the rate of 6% per annum, as per statutory provision provided under Notification No. 67/2003-C.E. (N.T.) dated 12.09.2003 relating to rate of interest on delayed refunds, from the date of payment of the amount till the date of refund of such amount. Request of the appellant to seek interest at the rate of 12% per annum. in my considered opinion, is not maintainable." 2.1 Appellant had filed a refund claim with the jurisdictional authorities on 02.03.2020, claiming refund of amounts deposited by them as per the direction of the officers of the revenue who visited their premises on 07.01.2016 and held that they were engaged in the manufacture and surreptitious removal of Zinc Ingots as well as Aluminum Ingots. 2.2 A show cause notice dated 05.05.2016 was issued to the Appellant in respect of the duty not paid on clandestinely manufactured and cleared goods. It was adjudicated by order in original dated 08.06.2017 confirming t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... excise and interest may make an application for such refund of duty and interest. 29. Section 11BB provides for interest on delayed refund. It states that if any duty ordered to be refunded under sub-section (2) of Section 11B is not refunded within three months from the date of receipt of the application, then the applicant shall be entitled to interest after the expiry of three months from the date of receipt of the application at such rate not below 5% and not exceeding 30% as may be notified by the Central Government in the Official Gazette. 30. In the present case, the provisions of Section 11B of the Excise Act would not be applicable. This is for the reason that the appellant was not claiming refund of duty. The applicant, as noticed above, had claimed refund of the revenue deposit. Such a finding has also been clearly recorded by the Tribunal in the order dated 31-1-2017, which order has attained finality. 33. There is no provision in the Excise Act, which deals with refund of revenue deposit and so rate of interest has not been prescribed, when revenue deposit is required to be refunded. 34. To be able to have some guidance regarding the rate of interest in case r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... per annum on amounts collected in excess of duty. - In exercise of the powers conferred by section 11DD of the Central Excise Act, 1944 (1 of 1944) the Central Government hereby fixes the rate of interest at Fifteen per cent per annum for the purpose of the said section. 38. It would also be to pertain to refer to the Notification issued under Section 11AB of the Excise Act, as it existed prior to 8-4-2011. It provides interest @ 18% per annum. The said Notification is reproduced below : "Notification No. 6/2011-C.E. (N.T.), dated 1-3-2011 Notification Under Section 11AB Rate of interest on delayed payment of duty. - In exercise of the powers conferred by section 11AB of the Central Excise Act, 1944 (1 of 1944) and in supersession of the notification of the Government of India in the Ministry of Finance (Department of Revenue) No. 66/2003-Central Excise (N.T.), dated the 12th September, 2003 [GSR (E), dated the 12th September, 2003], except as respects things done or omitted to be done before such supersession, the Central Government hereby fixes the rate of interest at eighteen per cent per annum for the purpose of the said section. This notification shall come into for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty-six per cent per annum, as is for the time being fixed by the Central Government, by notification in the Official Gazette. 33. ……." 9. In view of the entire above discussion, I hold that the appellant was entitled for the disbursement of entire amount of Rs. 60 lakh being the amount of pre-deposit. The adjustment of Rs. 38,79,769/- was absolutely unreasonable and unjustified for being not pertaining to the impugned issue. Appellant is simultaneously entitled for the interest to be calculated at the rate of 12% from the date of payment of the said amount to be calculated in accordance with the table showing date of deposit as mentioned above." 4.4 I find that all the above decisions are based on the decision of the Hon'ble Supreme Court in the case of Sandvik Asia. Interpreting the above decision of Hon'ble Supreme Court various benches of Tribunal have concluded in favour of the grant of interest from the date of deposit and at the rate of 12% (though not provided by the statute or any Notification issued in terms of Section 11BB or Section 35FF of the Central Excise Act, 1944). The decision in case of Sandvik Asia has been considered by the Hon'ble Supreme Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d also meet with the test of constitutional provision. 23. The respondents have not explained in any manner the issue of delay as raised by the writ applicants by filing any reply. 24. The chart indicating the delay referred to above speaks for itself. 25. In the overall view of the matter, we are inclined to hold the respondents liable to pay simple interest on the delayed payment at the rate of 9% per annum. The authority concerned shall look into the chart provided by the writ-applicants, which is at Page-30, Annexure-D to the writ application and calculate the aggregate amount of refund. On the aggregate amount of refund, the writ-applicants are entitled to 9% per annum interest from the date of filing of the GSTR-03. The respondents shall undertake this exercise at the earliest and calculate the requisite amount toward the interest. Let this exercise be undertaken and completed within a period of two months from the date of receipt of the writ of this order. The requisite amount towards the interest shall be paid to the writ-applicants within a period of two months form the date of receipt of the writ of this order." 7. The first case was then disposed of on the same d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pellate Authority or Appellate Tribunal or Court and the cases are strictly within the scope of the principal provision of Section 56 and not under the proviso thereof. In light of these provisions, the question which arises for consideration is whether the High Court was justified in awarding interest at the rate of 9 per cent per annum. 14. Before we deal with the question, it must be stated that initially a bench of two Judges of this Court in Union of India and Others v. Orient Enterprises and Another [(1998) 3 SCC 501 = 1998 (99) E.L.T. 193 (S.C.)] had observed that a Writ Petition under Article 226 of the Constitution filed solely for relief for payment of interest on delayed refund would not be maintainable. For facility, the relevant portion from the said decision is quoted here : "6. In Suganmal [AIR 1965 SC 1740 : 56 ITR 84 : 16 STC 398] this Court has laid down that a writ petition under Article 226 of the Constitution solely praying for the issue of a writ of mandamus directing the State to refund the money is not ordinarily maintainable for the simple reason that a claim for such a refund can always be made in a suit against the authority which had illegally collec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... layed refund of the amount so collected could not, in our opinion, be maintained. The decisions on which reliance has been placed by Shri Rawal were cases where the legality of the orders requiring payment of tax or duty were challenged and the High Court in exercise of its jurisdiction under Article 226 of the Constitution, while setting aside the said orders, has directed the refund of the amount so collected with interest. The direction for payment of interest in these cases was by way of consequential relief along with the main relief of setting aside the order imposing the tax or duty. Those cases stand on a different footing and have no application to the present case. The appeal is, therefore, allowed, the impugned judgment of the High Court is set aside and the writ petition filed by the respondents before the High Court is dismissed. No order as to costs." 15. However, subsequently another Bench of two Judges of this Court in Godavari Sugar Mills Ltd. in more or less identical circumstances settled the issue and found the Writ Petition to be maintainable. The observations of this Court were : "7. The High Court relying upon the decision of this Court in Suganmal v. Sta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 740]) (iv) There is a distinction between cases where a claimant approaches the High Court seeking the relief of obtaining only refund and those where refund is sought as a consequential relief after striking down the order of assessment, etc. While a petition praying for mere issue of a writ of mandamus to the State to refund the money alleged to have been illegally collected is not ordinarily maintainable, if the allegation is that the assessment was without a jurisdiction and the taxes collected was without authority of law and therefore the respondents had no authority to retain the money collected without any authority of law, the High Court has the power to direct refund in a writ petition. (Vide Salonah Tea Co. Ltd. v. Supdt. of Taxes [(1988) 1 SCC 401 : 1988 SCC (Tax) 99 (2)] (v) It is one thing to say that the High Court has no power under Article 226 of the Constitution to issue a writ of mandamus for making refund of the money illegally collected. It is yet another thing to say that such power can be exercised sparingly depending on facts and circumstances of each case. For instance, where the facts are not in dispute, where the collection of money was without the au ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er - say whereas, according to the original assessment he was entitled to refund of Rs. 10,000/-, he becomes entitled to a total refund of Rs. 15,000/- as a result of revised assessment made pursuant to the appellate order. The question is - on what amount and upto which date is the interest payable? On being elaborated, the question yields the following sub-questions : (a) is the interest payable only on Rs. 10,000/- and if so, whether the interest is payable till the date of first/original assessment or till the date of the revised assessment? (b) is the interest payable on Rs. 15,000/- and if payable, is it payable only till the date of first/original assessment or till the date of the revised assessment? After considering various decisions on the point, the conclusion drawn by the Court was : "The argument, which was upheld in some of the cases now under appeal, is that it will be inequitable if the assessee does not get interest on the amount of advance tax paid, when the amount paid in advance is refunded pursuant to an appellate order. This is not a question of equity. There is no right to get interest on refund except as provided by the statute. The interest on exce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pecified, ordinarily compensation shall have to be paid at the time of taking possession in pursuance of acquisition. By applying equitable principles, the courts have always awarded interest on the delayed payment of compensation in regard to acquisition of any property. ... 13. ... The said general principle will not apply in two circumstances. One is where a statute specifies or regulates the interest. In that event, interest will be payable in terms of the provisions of the statute. The second is where a statute or contract dealing with the acquisition specifically bars or prohibits payment of interest on the compensation amount. In that event, interest will not be awarded. Where the statute is silent about interest, and there is no express bar about payment of interest, any delay in paying the compensation or enhanced compensation for acquisition would require award of interest at a reasonable rate on equitable grounds." This Court, dealing with an acquisition under the Defence of India Act, 1962 (which did not contain any provision either requiring or prohibiting payment of interest), upheld the award of interest at 6% per annum. 11. Section 24 of the Act requires the C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the date of taking possession with interest at 3% per annum; and for the period beyond 20 years, the said provision regarding interest will cease to apply and the general equitable principles relating to interest will apply; and interest can be awarded at any reasonable rate, in the discretion of the court. Interest at the rate of 6% per annum, beyond 20 years would be appropriate and payable on equitable principles." (C) In Sandvik Asia Ltd., a Bench of two Judges of this Court was called upon to consider whether the inordinate delay of about 12 to 17 years in making a refund would entitle grant of interest. In the facts of that case, interest at the rate of 9 per cent per annum from 31-3-1986 to 27-3-1998 was granted. Even while doing so this Court observed : "48. There cannot be any doubt that the award of interest on the refunded amount is as per the statutory provisions of law as it then stood and on the peculiar facts and circumstances of each case. When a specific provision has been made under the statute, such provision has to govern the field. Therefore, the court has to take all relevant factors into consideration while awarding the rate of interest on the compensati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s failure to refund the interest payable within the statutory period. 6. As we have already noticed, in Sandvik case [Sandvik Asia Ltd. v. CIT, (2006) 2 SCC 508] this Court was considering the issue whether an assessee who is made to wait for refund of interest for decades be compensated for the great prejudice caused to it due to the delay in its payment after the lapse of statutory period. In the facts of that case, this Court had come to the conclusion that there was an inordinate delay on the part of the Revenue in refunding a certain amount which included the statutory interest and therefore, directed the Revenue to pay compensation for the same, not an interest on interest." 17. Since reliance was placed by the High Court on the decision of the Constitution Bench of this Court in K.T. Plantation Pvt. Ltd. and Anr., we must note that what arose for consideration in that case, was the constitutional validity of the Devika Rani Roerich Estate (Acquisition & Transfer) Act, 1996, and Section 110 of the Karnataka Lands Reforms Act, 1996 and certain notifications issued by the State Government. The questions which arose for consideration were set out in paragraph 25 of the decis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this Court in Modi Industries Ltd. and Godavari Sugar Mills Ltd. wherever a statute specifies or regulates the interest, the interest will be payable in terms of the provisions of the statute. Wherever a statute, on the other hand, is silent about the rate of interest and there is no express bar for payment of interest, any delay in paying the compensation or the amounts due, would attract award of interest at a reasonable rate on equitable grounds. It is precisely for this reason that paragraph 9 of the decision in Godavari Sugar Mills Ltd. accepted the submission made by the Learned Counsel for the respondents and confined the rate of interest to the prescription made in the statute. The award of interest at a rate in excess of what was prescribed by the statute was only for a period beyond 20 years where the matter was not strictly covered by the statute and as such it would be in the realm of discretion of the Court. It must also be noted here that the inordinate delay of up to 17 years in making refunds was a special circumstance when this Court was persuaded to accept grant of interest at the rate of 9 per cent per annum in Sandvik Asia Ltd. Even while doing so, the observat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce prior to April, 1991 contained sub-section (4) in identical words. It said : "(4) Save as otherwise provided by or under this Act, no claim for refund of any duty of excise shall be entertained". Sub-section (5) was more specific and emphatic. It said : "Notwithstanding anything contained in any other law, the provisions of this section shall also apply to a claim for refund of any amount collected as duty of excise made on the ground that the goods in respect of which such amount was collected were not excisable or were entitled to exemption from duty and no court shall have any jurisdiction in respect of such claim." It started with a non-obstante clause; it took in every kind of refund and every claim for refund and it expressly barred the jurisdiction of courts in respect of such claim. Sub-section (3) of Section 11B, as it now stands, is to the same effect - indeed, more comprehensive and all-encompassing. It says, "(3) Notwithstanding anything to the contrary contained in any judgment, decree, order or direction of the Appellate Tribunal or any court or in any other provision of this Act or the rules made thereunder or in any law for the time being in force, no refund shal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e idea was "to consolidate in a single enactment all the laws relating to central duties of excise". The Act is a self-contained enactment. It contains provisions for collecting the taxes which are due according to law but have not been collected and also for refunding the taxes which have been collected contrary to law, viz., Sections 11A and 11B and its allied provisions. Both provisions contain a uniform rule of limitation, viz., six months, with an exception in each case. Sections 11 and 11B are complimentary to each other. NATURE AND CHARACTER OF REFUND CLAIMS UNDER THE CENTRAL EXCISES AND SALT ACT AND THE CUSTOMS ACT : 96. It would be evident from the above discussion that the claims for refund under the said two enactments constitute an independent regimen. Every decision favourable to an assessee/manufacturer, whether on the question of classification, valuation or any other issue, does not automatically entail refund. Section 11B of the Central Excises and Salt Act and Section 27 of the Contract Act, whether before or after 1991 amendment - as interpreted by us herein - make every refund claim subject to proof of not passing-on the burden of duty to others. Even if a s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Central Excises and Salt Act and Section 27 of the Customs Act do constitute "law" within the meaning of Article 265 of the Constitution of India and hence, any tax collected, retained or not refunded in accordance with the said provisions must be held to be collected, retained or not refunded, as the case may be, under the authority of law. Both the enactments are self-contained enactments providing for levy, assessment, recovery and refund of duties, imposed thereunder . Section 11B of the Central Excises and Salt Act and Section 27 of the Customs Act, both before and after the 1991 (Amendment) Act are constitutionally valid and have to be followed and given effect to. Section 72 of the Contract Act has no application to such a claim of refund and cannot form a basis for maintaining a suit or a writ petition. All refund claims except those mentioned under Proposition (ii) below have to be and must be filed and adjudicated under the provisions of the Central Excises and Salt Act or the Customs Act, as the case may be. It is necessary to emphasise in this behalf that Act provides a complete mechanism for correcting any errors whether of fact or law and that not only an appeal is pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t maintained with the Principal Commissioner of Central Excise or Commissioner of Central Excise; …. 4.7 Further while defining the relevant date under Section 11B of the Central Excise Act, 1944 specifically cases of refund which arise as result of decisions of appellate authority or court have been highlighted. The said provisions is reproduced below: (B) "relevant date" means,-- (ec) in case where the duty becomes refundable as a consequence of judgment, decree, order or direction of appellate authority, Appellate Tribunal or any court, the date of such judgment, decree, order or direction;" 4.8 Thus all the refunds which are filed under the Central Excise Act, 1944 in terms of the decision of Hon'ble Supreme Court in case of Mafatalal Industries and the above provisions whether of the duty, interest or any deposit made are governed by the provision of Section 11B of the Act. The interest thus gets governed by the provisions of Section 11BB as has been held by Hon'ble Supreme Court in case of Ranbaxy, referred in the impugned order. There has been exception carved out only for determination of relevant date for determining the period for which interest is to be pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... articularly on 14 November 2016 filed a formal application for refund which had accrued in terms of the order passed by the Appellate Authority on 31 December 2008 and consequent to the challenge thereto being negatived by the CESTAT in terms of its judgment of 27 September 2016. 21. For the purposes of evaluating the submissions aforenoted, it would be apposite to notice the statutory provisions which apply. The issue of refund and the interest payable in case of delay is governed by Sections 11B and 11BB. The said provisions are reproduced hereinbelow: - "Section 11-B. Claim for refund of [duty and interest, if any, paid on such duty].-- …. Section 11-BB. Interest on delayed refunds.-- … 22. It would also be pertinent to notice Sections 35F and 35FF in order to highlight the distinction between the statutory scheme underlying refund of duty and the return of a pre-deposit made in connection with an appeal that may be preferred. Those two provisions are extracted hereinbelow: - "Section 35-F. Deposit of certain percentage of duty demanded or penalty imposed before filing appeal.--The Tribunal or the Commissioner (Appeals), as the case may be, shall not ente ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sions of Section 35-FF as it stood before the commencement of the said Act." 23. The Court, at the outset notes, that Section 11B(1) in clear and unambiguous terms contemplates the making of an application for refund being made by any person claiming refund of any duty of excise and interest paid on such duty. The claim of refund insofar as the petitioner is concerned arose in the backdrop of the order in original coming to be set aside in appeal. The petitioner appears to have made an application for refund ultimately and only after the departmental appeal before the CESTAT came to be dismissed. 24. We deem it apposite to observe that the mere pendency of an appeal or an order of stay that may operate thereon would not detract from the obligation of any person claiming a refund making an application as contemplated under Section 11B(1) within the period prescribed and computed with reference to the "relevant date". We do so observe in light of the indubitable principle that an order of stay that may operate in an appeal does not efface the demand or the obligation of refund that may have sprung into existence. It merely places the enforcement of the order appealed against in a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cates that interest would commence from the date of the order of the Appellate Authority as distinct from the making of an application which is prescribed to be the starting point insofar as Section 11BB of the 1944 Act is concerned. 29. Regard must also be had to the fact that in the case of refund of duty, it is also incumbent upon the assessee to declare and establish that the burden of tax has not been passed on. Absent that declaration, any refund that may be made would itself amount to the assessee being unjustly enriched. The making of an application and a declaration to the aforesaid effect is thus not merely an empty formality. This too appears to reinforce the imperatives of an application being formally made before a claim for refund is considered. 30. That only leaves the Court to consider the decisions which were cited by Mr. Mishra for our consideration. However, before proceeding to do so, we deem it pertinent to enter the following prefatory observations. A levy of interest on refund must undoubtedly follow where it is found that the amount has been unjustifiably retained or remitted with undue delay. The respondents cannot be permitted to retain moneys which ar ..... 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