In a recent decision, the Allahabad High Court observed that the assessee is entitled to the interest on refund of excess duty paid after three months from the date of representation moved by him under section 11B of the Central Excise Act, 1944.
The factual settings of the case are that the petitioners are manufacturers of the product “gulabari”. The Department took a stand that the said product was taxable at the rate prescribed in the First schedule of the Central Excise Tariff Act. The order was reversed by the Customs, Excise and Gold (Control) Appellate Tribunal, New Delhi. When the matter was concluded by the Tribunal in favor of the assessee, they moved a refund application requesting the authorities for the amount deposited by them during the course of appellate proceedings. The Assistant Commissioner rejected the application by holding that the refund amount cannot be granted to the petitioner as the same would constitute unjust enrichment.
Though the Commissioner (Appeals) has confirmed the order impugned, the Appellate Tribunalhas reversed the said orders by rejecting the findings of the lower authorities. Though the Revenue preferred an appeal before the High court against the order of the Tribunal, the same was also dismissed.Consequently, the Assistant Commissioner granted the refund amount, but refused to pay interest on the refund. It is in this circumstance, the petitioners approached the High Court.
According to the assessee, as per section 11B of the Central Excise Act, 1944 any duty ordered to be refunded to any applicant, if not refunded within three months from the date of receipt of application, Assessee shall be entitled for interest on such rate not below ten percent and not exceeding thirty percent on the delayed amount.
The Court dive deeply into the facts of the case, and observed that “Facts detailed above evidently show that respondent authorities were adamant in retaining huge money legally refundable to petitioner for one or the other reason which could not withstand when tested in Court i.e. Tribunal and this Court. Now respondents are trying to deprive petitioner, benefit of interest though respondents themselves were guilty by not refunding amount in due time and also withheld the same without any authority of law. In other words, here is a case, where respondents deprive petitioner of his property in a manner which was not permissible in law. Once it was held by Tribunal, vide judgment and order dated 14.01.2000that product “Gulabari’ was not classifiable under the Heading 33.03 of the First Schedule of Act 1985. Pursuant thereto petitioner submitted application for refund in prescribed form but the Revenue authorities again relying on Heading 33.03 rejected claim for refund and again lost before Tribunal who held vide order dated 10.10.2003 that once an issue was already decided by it, it was not open to departmental authorities to sit in appeal and reiterate their view which has not been found correct by Tribunal in its order dated 14.01.2000. Respondents therefore, had no authority in law to retain the amount realised from petitioner on and after the judgment dated 14.01.2000 passed by Tribunal and non refund thereof despite of application filed by petitioner in prescribed form under Section 11BBrenders them liable to pay interest on refundable amount.”
The bnch comprising of Justice Sudhir Agarwal and Justice Kaushal Jayendra Thaker observed that “there is another aspect of matter, application for refund was filed by petitioner on 08.03.2000. Under Section 11 BB it is provided that if the authority is satisfied that an amount is to be refunded to Assessee but the same has not been refunded within three months from the date of filing of application, Assessee would be entitled forinterest. Order passed by Revenue authority under Section 11B(2) for refund is not relevant for the purpose of attracting interest under Section 11BB but what is said that once refund is found admissible, Assessee if has not been refunded the amount within three months from the date of receipt of application under sub Section (1), he shall be paid interest. Meaning that there is no time limit prescribed for taking a decision about refund but that law makes it very clear that amount if not refunded within three months from the date of receipt of application, interest shall be payable.”
Based on the above findings, the Court held that the petitioners, in the instant case would be entitled for interest under Section 11BB of Central Excise Act 1944, after three months from the date of representation till the amount of refund actually paid.
Read the full text of the Judgment below.
