Payment of interest while ordering refund - Central Excise - 276/10/90-CX.8A

Payment of interest while ordering refund F. No. 276/10/90-CX.8A Dated 3-1-1991 Government of India Ministry of Finance (Department of Revenue) Central Board of Excise Customs, New Delhi Subject : Payment of interest while ordering refund. Instances have come to the Notice of the Board where the Courts have awarded payment of interest, while ordering refund of excise duties. In view of executive instruction issued by the Ministry, the Collectors are required to refer such cases to the Ministry for sanction of the interest amounts. 2. There is no provision in the Central Excises Salt Act to grant interest in such cases. It would, therefore, appear that an interest is awarded when the Department is at fault in granting refund and the Department had deliberately delayed payment of refund after appropriate authority had granted the refund. In some cases, the High Courts award interest without going into the merits of the case. The Board desires that, the Collectors should bestow greater attention to such cases instead of merely, reporting the matter to the Ministry for sanction. 3. It is therefore, necessary that the Collectors take appropriate action at the following two stages, namely :- (a) when the matter of claim and grant of refund is being agitated before the High Court, and (b) when the High Court has already awarded interest in its decision. While the case is being contested before the High Court or other judicial forums, the Collectors should examine the following namely :- (a) the liability of the Department to refund the amount claimed, on merits; (b) whether the claim is admissible in terms of provisions of Sec. 11B of the Central Excise Salt Act; and (c) whether the grant of refund in such cases would constitute unjust enrichment. Proper defence, should be put up both in the Written submission to the court and during the argument of the legal proceedings. 4. Where the Court has already awarded interest in its order, notwith standing the best efforts of the Department, the Collectors should immediately :- (i) explore the possibility of filing appropriate appeals etc. against the said decision; and (ii) report the matter to the Ministry giving full facts of the case including the circumstances under which the Court has ordered payment of interest. Care should be taken to ensure that this exercise is carried out immediately on the pronouncement of the judgment and there should not be any delay on the part of Collectorate. 5. In this connection attention is also invited to Board's Instructions contained in its Circular No. 53/90, dated 26th September, 1990 (issued from Ministry's File No. 268/20/89-CX.S) about the action to be taken in cases where refunds are ordered by the Courts and CEGAT where the competent officer is satisfied that the duty burden has already been passed on to the consumers.