Excise Duty wrongly Collected is liable to  Refund even in the absence of Statutory Provisions: Delhi HC [Read Order]

In a recent judgement, the Delhi High Court held that excise duty wrongly collected is liable to refund even in the absence of statutory provisions.

Goldy Engineering Works and Sharp Moulds and Dies, the petitioners questioned the date from which interest is leviable on an asserted delay in disbursal of refund under the Central Excise Act, 1944.

The petitioners stated that interest is liable to run from the date when the refund is determined and would not be dependent on any application or other positive step being taken by an assessee. This contention is controverted with the Central Excise Department  asserting that in light of the plain language of Section 11B read along with Section 11BB of the 1944 Act, the moving of an application is a prerequisite for computation of the date from which interest would be payable on a refund.

behalf of the petitioner, Mr Mishra would contend that the stand as taken by respondents is wholly arbitrary since once the order in original had come to be set aside in appeal, they were obliged to refund the amounts that had been collected from the petitioner during the course of the investigation and the proceedings which were initiated. I

that ordinarily grant of interest flows either from the statutory provision or contractual relations between the parties. In the present case, there is no statutory provision providing for interest on interest. In the present case, however, we find that the excise authorities acted rather unjustly and initially delayed not only the refund but thereafter, unjustly withheld the interest payable thereon. At all stages, the petitioners had to approach higher authorities in further appeals.

Though the Commissioner (Appeals) had specifically provided that the refund shall be granted alongwith interest under section 11BB if payable, the same was not realised on the ground that the interest would be payable only after the date of the appellate order and that the refund application was filed after the date of the appellate order completely ignoring the fact that refund claims were filed much earlier and also ignoring the instructions of the CBEC issued in exercise of powers under section 37B of the Act.

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 money which is otherwise not due or are otherwise liable to be returned.

A division bench comprising Justice Yashwant Varma and Justice Dharmesh Sharma observed that even in the absence of a statutory provision if it be found that tax or duty had been wrongly collected, it would be liable to be refunded.

The decision of the Court in Team HR Services had frowned upon the distinction sought to be advocated by the respondents there between a deposit made under protest and a pre-deposit made in connection with an appeal. 

“As the respondents had also failed to draw the attention of the Court to any statutory provision which governed the issue of refund. The respondents shall revisit the issue of payment of interest in light of the observations made hereinabove. Interest, if any, shall be liable to be computed and paid to the petitioners if it is found that the refund was effected beyond a period of three months when computed from the date when the respective applications were made and received.”, the Court held. 

To Read the full text of the Order CLICK HERE

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