TMI Blog2013 (6) TMI 88X X X X Extracts X X X X X X X X Extracts X X X X ..... ssue of classification by the Board and the appeal was decided in their favour. Thereafter, on such refund, interest was improperly denied. Ordinarily grant of interest flows either from 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. Department cannot avoid the liability of accounting for interest on the delayed payment of interest to the extent the same was paid late. - interest on interest allowed at the rate of 9%. - Decided in favor of assessee. - Special Civil Application No. 3163 of 2008 - - - Dated:- 23-8-2012 - Akil Kureshi and Harsha Devani, JJ. Shri Paresh M. Dave, Advocate, for the Petitioner. Shri Y.N. Ravani, Advocate, for the Respondent. JUDGMENT The petitioners have filed this petition seeking a writ, order or direction setting aside Order-in-Original dated 16-5 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ated 4-9-1996 and sanctioned refund only to the tune of Rs. 11,05,000/- which represented the amount secured by bank guarantee. With respect to rest of the claims, he ordered crediting the amount in the Consumer Welfare Fund on the ground that the petitioners had not established that the burden of differential duty was not passed on to the ultimate consumer. In short, on the ground of unjust enrichment, rest of the refund claim was rejected. 5. Aggrieved by such order of the Assistant Commissioner dated 4-9-1996, the petitioners filed an appeal before the Commissioner (Appeals) who by his order dated 18-2-1999 substantially allowed the appeal and held that the petitioners would be entitled to further refund of Rs. 1,02,53,118/-. He accordingly modified the order of the Assistant Commissioner with consequential relief including interest, if any, admissible under Section 11BB of the Central Excise Act, 1944. Relevant portion of the order reads as under :- The ratio laid down in the above mentioned decision/judgments is squarely applicable, in this case, in as much as, HDPE tapes are captively consumed in the manufacturing of fabrics/sacks. The adjudicating authority has already ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uch order of the Deputy Commissioner to the extent the petitioners were denied interest on the refund found due and payable, the petitioners preferred an appeal before the Commissioner (Appeals). Before the Commissioner (Appeals), the petitioners contended that the Deputy Commissioner did not grant interest on the delayed refund though the refund claim was lodged way back in the year 1994 and actual refund was paid only in March, 2003 i.e. almost after eight years. Commissioner (Appeals) thereupon passed his order dated 31-5-2004 and allowed the appeal. He was of the opinion that for the refund claim relatable to the period after insertion of Section 11BB of the Act with effect from 26-5-1995, the petitioners would be entitled to interest on the delayed refund after three months from the date when the application for refund was filed. He also observed as under :- I further find that in this case the appellants have filed refund claims prior to insertion of Section 11BB in Central Excise Act, 1944 w.e.f. 26-5-1995 providing for interest on delayed refund; The Hon ble Tribunal in case of Hindustan Motors Ltd. v. CCE, Calcutta IV - 2003 (155) E.L.T. 306 (Tri.-Kolkata) have held tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sion of Apex Court in the case of Sandvik Asia Ltd. v. Commissioner of Income Tax-I, Pune reported in 2006 (196) E.L.T. 257 (S.C.) = 2007 (8) S.T.R. 193 (S.C.). 10. The petitioners such claim, however, was rejected in its entirety by the Assistant Commissioner by his order dated 16-5-2007 on the ground that such claim is not based on any statutory provision. 11. The petitioners approached the appellate authority against such order of the Assistant Commissioner by filing two separate appeals since the Assistant Commissioner had passed two separate orders. Such appeals also came to be rejected by two separate orders both dated 5-9-2007. The Commissioner (Appeals) was of the opinion that in the earlier appeal before the Commissioner, the petitioners had not made any claim for further interest. The Commissioner had granted benefit of interest on the late payment of refund only with effect from 26-5-1995. In absence of any claim before the Appellate Commissioner and the petitioners having accepted the order of the Appellate Commissioner, they cannot now claim interest on the delayed interest. On this ground, the appeals were dismissed. 12. At that stage, the petitioners have file ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... im for interest on wrongfully withheld interest observing that such withheld interest becoming due and payable partakes the character of excess amount of tax refundable. (iii) In case of Chimanlal S. Patel v. Commissioner of Income-Tax and Another reported in 1994 (210) ITR 419 wherein a Division Bench of this court had taken a similar view. (iv) In case of Afrique Tradelinks Pvt. Ltd. v. Union of India reported in 2004 (61) RLT 726 (Guj.) wherein a Division Bench of this court, interpreting provisions of Customs Act, 1962 which are in pari materia to similar provisions made in the Central Excise Act, held that interest would accrue on a refund claim not after three months from the date of the appellate order in favour of the assessee, but after three months from the refund application. 13.2 Counsel referred to the decision of the Tribunal in case of Bharat Heavy Electricals Ltd. (supra) to contend that in such decision also, the Tribunal did not lay down the proposition that interest would be payable from period of three months after the assessee s appeal is allowed finally. Counsel drew our attention to a decision of a Division Bench of Allahabad High Court in the case of S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provide for any interest on delayed payment of interest, such claim should not be accepted. He submitted that payment of interest is governed either by a statute or under contractual agreement between the parties. In the present case, neither the statute nor the contractual relations provided for any payment of interest on delayed release of interest. Delay, if any, therefore, in payment of such interest would not entail any further liability on the Department to pay interest thereon. 15. Having thus heard learned counsel for the respective parties and having perused the documents on record, we may highlight a few salient features of the case. As already noted, the petitioners and the Department had a dispute with respect to correct classification of the goods manufactured by the petitioners. Under protest, the petitioners were, on the insistence of the Department, made to pay duty at the higher rate. The petitioners, while paying such duty under protest continued their dispute with the Department and ultimately succeeded in establishing that the goods were classifiable under Chapter 39 and that therefore, excess duty was collected from them. In fact, C.B.E. C. had issued a cl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the interest would be available only after three months of the date of the appellate order. In the said case, the question involved was of refund of pre-deposit. The assessee when in appeal was required to make pre-deposit of the duty demand. When the appeal was disposed of, refund was found payable out of such pre-deposit amount. It was in this background, the Tribunal observed that entitlement for refund would arise only when the appeal was finally disposed of in favour of the appellant by the Tribunal and that being so, no interest can be claimed for the period prior to the date of final order. In this case, it was thus clearly rendered in a different fact situation. Sixthly, the Government in its circular dated 27-3-1995 had clarified certain newly introduced provisions in taxing statutes. Section 27A was introduced in the Customs Act to provide for payment of interest on refunds of duty. Similar provision was also simultaneously made under Section 11BB of the Central Excise Act. While clarifying Section 27A of the Customs Act, in above circular it was provided as under :- 67.2.2 It has also been provided that in cases where appellate remedies are resorted to either by the De ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nted out by the learned counsel for the petitioners, in case of Ranbaxy Laboratories Ltd. v. Union of India reported in 2011 (273) E.L.T. 3 (S.C.) = 2012 (27) S.T.R. 193 (S.C.), the Apex Court in context of Section 11BB of the Central Excise Act held that interest on delayed interest is payable under said application on expiry of a period of three months from the date of receipt of application for refund and not from the date of order of refund or appellate order allowing such refund. 17. Legal position is thus abundantly clear. It is true that the decision of this court in case of Afrique Tradelinks Pvt. Ltd. (supra) and the Apex Court in the case of Ranbaxy Laboratories Ltd. (supra) were rendered subsequent to the Deputy Commissioner taking a contrary view. However, the Departmental clarification itself was sufficiently clear and was binding on the Deputy Commissioner. Reference to the decision of the Tribunal in case of Bharat Heavy Electricals Ltd. was wholly erroneous. All that the Allahabad High Court in case of Super Electronics (supra) provided was for interest after three months of the date of refund application. 18. As already noted, the petitioners were made to engag ..... X X X X Extracts X X X X X X X X Extracts X X X X
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