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2016 (3) TMI 68 - SUPREME COURT

2016 (3) TMI 68 - SUPREME COURT - 2016 (333) E.L.T. 193 (SC) - Claim of interest on delayed Refund - delay in grant of refund - relevant date to be computed from the date of application of refund or from the date of rectification of defect in the refund application - Held that:- It is not a case where the assessee is claiming automatic refund. It is a case that pertains to grant of interest where the refund has been granted. The grievance pertains to delineation by the competent authority in a p .....

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It is obligatory on the part of the Revenue to intimate the assessee to remove the deficiencies in the application within two days and, in any event, if there are still deficiencies, it can proceed with adjudication and reject the application for refund. The adjudicatory process by no stretch of imagination can be carried on beyond three months. It is required to be concluded within three months. The decision in Ranbaxy Laboratories Limited (supra) commends us and we respectfully co .....

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ak Misra, J. The respondent, M/s. Hamdard (Waqf) Laboratories, is engaged in the business of manufacture and sale of various items including Rooh Afza which is a sweetened non-alcoholic beverage, and the respondent treated it to have been classified under the sub-heading 2201.90 of the Schedule to the Central Excise Tariff Act, 1986 (for short, 'the Tariff Act'), but the Revenue did not accept the classification claimed by the assessee-respondent on the foundation that it was classifiabl .....

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ommissioner (Appeals) who negatived the stand of the assessee. Being grieved the assessee preferred an appeal before the Central, Excise and Service Tax Appellate Tribunal (for short, 'the tribunal'), which, agreed with the view expressed by the fora below and consequently dismissed the appeal. 3. The decision rendered by the tribunal, was called in question by the assessee in Civil Appeal No. 7766 of 1995. The two-Judge Bench in Hamdard (Wakf) Laboratories vs. Collector of Central Excis .....

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4. Be it mentioned here that this Court in its judgment dated 4th August, 1999 had stated that it falls within the term of heading 2201.90 and accordingly, set aside the order passed by the tribunal and further directed for consequential relief to follow. For the sake of completeness, paragraphs 7 and 8 of the said decision are extracted below:- "7. The Tribunal would also appear to have concluded that the said sharbat was not a beverage but a preparation for the same. The fact that these t .....

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judgment and order dated 4.5.1995 of the National Consumer Disputes Redressal Commission, New Delhi in F.A. No.65 of 1994]. It seems to us that the phrase "preparations for lemonades or other beverages" in clause (j) of Note 5 of Chapter 21 was intended to refer to the industrial concentrates from which aerated water and similar drinks are mass produced and not to preparations for domestic use like the said sharbat. 8. It was necessary for the respondents to have shown, having regard .....

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impact at a later stage. 5. After the judgment was pronounced, the respondent filed an application on 25th August, 1999 for grant of refund. The Revenue, in response, vide letter No.C. No.V (18) Ref/311/99/7041 dated 27.09.1999 communicated to the respondent-assessee as follows:- "You are requested to furnish the evidences showing that the incidence of duty debited/deposited by you for ₹ 3.74 crores has not been passed on to your customers. It has also been observed that you have not .....

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o credit was taken in the PLA and the balance amount of ₹ 54,00,000.00 was debited from the PLA under protest in presence of Superintendent, Central Excise, Range-IV, Div. I Ghaziabad. In this way when the amount was not utilised by us in any way other than making deposits against the Adjudications Order of the Assistant Commissioner, then the question or scope of passing it on to the consumer does not arise. However, we certify that we had not passed on this amount of ₹ 3,74,00,000. .....

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haziabad. The said authority recorded the history of the litigation and order passed by this Court and opined as follows:- "I have carefully examined the claim papers and submission made by the party in their reply and at the time of personal hearing. Regarding deposit of ₹ 5,40,000.00 in PLA vide Entry No.956 dated 26.6.95 under protest, I observed that the contention of the party is tenable as the letter of protest dated 8.9.94 protest all payments made under protest on 8.9.94 and t .....

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(appeal), Ghaziabad, who had decided in the above O-I-A that the assessable value in relation to any excisable goods, does not include the amount of duty of excise, sales tax and other taxes, if any, payable on such goods. Therefore, in the case for cum duty price, the abatement of excise duty and other taxes is to be allowed for determining the assessable value of the goods for the purpose of levy of excise duty thereon and accordingly passed order that differential duty payable by the appellan .....

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ssification. As stated earlier, in the original order of this Court, the classification was mentioned as 2201.90 which was corrected by a corrigendum making it "2202.90". Be that as it may, we clearly state that it has neither any bearing nor impact on the present lis. 9. Presently to the flash back. In pursuance of the order passed by the competent authority, an amount of ₹ 3,74,00,000 /- was refunded by cheque no.639266 dated 15.11.2000 payable at PNB Navyug Market, Ghaziabad. .....

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ned that the liability for payment of interest is statutory and it is the bounden duty of the Assistant Commissioner to pay interest from 26th November, 1999 till 15th November, 2000 at the rate specified under Section 11-BB of the Act. The aforesaid conclusion impelled the Division Bench to allow the writ petition with costs which was assessed at ₹ 10,000 /-. The said order is the subject matter of appeal by special leave. 10. We have heard Mr. Yashank Adhyaru, learned senior counsel alon .....

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ion has to be rejected. Elucidating the said argument, learned senior counsel would submit that if there is a defective application or an application not meeting the requisite criteria stipulated under the statutory provision, it is to be held that there is no application in the eye of law and hence, the period has to commence from the date when the defects are rectified. In essence, the submission is that the prescription of three months in the said provision has to commence when the applicatio .....

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were not appositely corrected and things only came to light at the time of adjudication and thereafter in quite promptitude, the amount was paid by way of a cheque and hence, the claim of interest is absolutely unjustified and resultantly, the grant of interest by the High Court is wholly unsustainable. 12. Mr. Upadhyay, learned senior counsel appearing for the respondent would contend that in the absence of a particular form in praesenti the application was in order from the inception and, in .....

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been placed on Ranbaxy Laboratories Limited vs. Union of India & Ors. (2011) 10 SCC 292. 13. To appreciate the controversy in proper perspective, it is seemly to refer to the provisions dealing with refund and interest. Section 11-B deals with claim for refund of duty and interest, if any, paid on such duty. The said provision reads as under:- "Section 11B. Claim for refund of duty and interest, if any, paid on such duty- (1) Any person claiming refund of any duty of excise and interest .....

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of excise and interest, if any, paid on such duty in relation to which such refund is claimed was collected from, or paid by, him and the incidence of such duty and interest, if any, paid on such duty had not been passed on by him to any other person: Provided that where an application for refund has been made before the commencement of the Central Excises and Customs Laws (Amendment) Act, 1991, such application shall be deemed to have been made under this sub-section as amended by the said Act .....

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the applicant is refundable, he may make an order accordingly and the amount so determined shall be credited to the Fund: Provided that the amount of duty of excise and interest, if any, paid on such duty as determined by the Assistant Commissioner of Central Excise or Deputy Commissioner of Central Excise]under the foregoing provisions of this sub-section shall, instead of being credited to the Fund, be paid to the applicant, if such amount is relatable to - (a) rebate of duty of excise on exc .....

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if he had not passed on the incidence of such duty and interest, if any, paid on such duty to any other person; (e) the duty of excise and interest, if any, paid on such duty borne by the buyer, if he had not passed on the incidence of such duty and interest, if any, paid on such duty to any other person; (f) the duty of excise and interest, if any, paid on such duty borne by any other such class of applicants as the Central Government may, by notification in the Official Gazette, specify: Provi .....

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being in force, no refund shall be made except as provided in sub-section (2). [Emphasis added] 14. Section 11-BB deals with interest of delayed refunds. The said provision is extracted below:- Section 11-BB. Interest on delayed refunds.- If any duty ordered to be refunded under sub-section (2) of section 11B to any applicant is not refunded within three months from the date of receipt of application under sub-section (1) of that section, there shall be paid to that applicant interest at such r .....

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date on which the Finance Bill, 1995 receives the assent of the President, is not refunded within three months from such date, there shall be paid to the applicant interest under this section from the date immediately after three months from such date, till the date of refund of such duty. Explanation.- Where any order of refund is made by the Commissioner (Appeals), Appellate Tribunal, National Tax Tribunal or any court against an order of the Assistant Commissioner of Central Excise or Deputy .....

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t the whole or any part of the duty of excise and interest, if any, paid on such duty is refundable. The application, as submitted by Mr. Adhyaru, has to be an application in law. Section 11-BB which deals with interest on delayed refund clearly and categorically predicates that if any duty ordered to be refunded under sub-section (2) of Section 11-B is not refunded within three months from the date of receipt of the application under Section (1) of Section 11-B, there shall be paid to the appli .....

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May, 1995. It deals with interest of delayed refund under Section 11-BB. Paragraph 2 of the said circular being relevant is reproduced below:- "2. Keeping the above in view, the following instructions are being issued regarding refunds claimed under section 11 BB of CE & SA, 1944:- (a) Refund application must invariably be filed in the office of the Assistant Collector and not with the Range Superintendent. (b) Immediately on receipt of an application, the same must be scrutinized by an .....

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ths in terms of Section 11-BB shall be counted from the date following the date of receipt of refund application up to the date of dispatch of cheque for refund. (e) The Collector should direct the Divisional Assistant Collector to designate an officer by name who will carry out the initial verification and issue the acknowledgment thereof. (f) Such acknowledgment must be issued within 48 hours of the receipt of the refund application, excluding holidays. (g) Where the refund application is foun .....

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the receipt of the refund application. (I) Check-lists of various documents which should be filed with the refund claims of different types are annexed herewith to be used as guidelines. However, the list may not be treated as exhaustive and any other documents, if required, may be included therein and called from the assessee." 16. Mr. Upadhyay, learned senior counsel has rested his stand on paragraph (g) which provides that where the refund application, is found to be incomplete, a letter .....

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ioned by the Revenue. They relate to the arena whether the assessee has passed on the duty to others; and whether the amount that was deposited was done under protest. The assessee was granted three days time and within a span of three days, i.e., 30th September, 1999, the same was complied with by stating that the duty had not been passed on by the assessee to any consumer and the amount was deposited under protest. With the said communication, the proceedings commenced so that the competent au .....

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ing authority passed an order dated 16.11.2000 granting refund. 17. The seminal issue is whether there has been delay in grant of refund and consequently, whether the respondent-assessee is entitled to interest. Keeping in view the enumerated facts, the submissions canvassed and the provisions referred to, it is necessary to appreciate the principle stated in Ranbaxy Laboratories Limited (supra). In the said case, the question arose whether the liability of the Revenue to pay interest under Sect .....

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t in case any duty paid is found refundable and if the duty is not refunded within a period of three months from the date of receipt of the application to be submitted under sub-section (1) of Section 11B of the Act, then the applicant shall be paid interest at such rate, as may be fixed by the Central Government, on expiry of a period of three months from the date of receipt of the application. The Explanation appearing below Proviso to Section 11BB introduces a deeming fiction that where the o .....

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the Act. 13. Manifestly, interest under Section 11BB of the Act becomes payable, if on an expiry of a period of three months from the date of receipt of the application for refund, the amount claimed is still not refunded. Thus, the only interpretation of Section 11BB that can be arrived at is that interest under the said Section becomes payable on the expiry of a period of three months from the date of receipt of the application under Sub-section (1) of Section 11B of the Act and that the said .....

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said circular, the Court opined as follows:- "12. Thus, ever since Section 11BB was inserted in the Act with effect from 26th May 1995, the department has maintained a consistent stand about its interpretation. Explaining the intent, import and the manner in which it is to be implemented, the Circulars clearly state that the relevant date in this regard is the expiry of three months from the date of receipt of the application under Section 11 B (1) of the Act." The ultimate conclusion .....

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ench decision rendered in Mafatlal Industries Ltd. & Ors. vs. Union of India & Ors. (1997) 5 SCC 536 which has been emphatically relied upon by Mr. Adhyaru, learned senior counsel for the Revenue. He has drawn our attention to paragraphs 83 and 91. Relying on the said paragraphs, it is contended by Mr. Adhyaru that the onus is on the assessee to satisfy the competent authority that he has not passed on the burden of duty to others, for the claim of refund is founded on the said bedrock. .....

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ere the petitioner- plaintiff has not himself suffered any loss or prejudice (having passed on the burden of the duty to others), there is no justice or equity in refunding the tax (collected) without the authority of law) to him merely because he paid it to the State. It would be a windfall to him. As against it, by refusing refund, the monies would continue to be with the State and available for public purposes. The money really belongs to a third party - neither to the petitioner/plaintiff no .....

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d to refund of duty, as a result of appeal or courts order, should also be made to apply and satisfy all the requirements of sub-sections (1) and (2) of Section 11-B, when he is entitled to such refund as a matter of right. The said contention was not accepted by the Court and while not accepting the larger Bench stated that:- "… Such a holding would run against the very grain of the entire philosophy underlying the 1991 Amendment. The idea underlying the said provisions is that no r .....

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it has no doubt given us a pause; it is certainly a substantial plea, but there are adequate answers to it. Firstly, the rule means that only the person who has actually suffered loss or prejudice would fight the levy and apply for refund in case of success. Secondly, in a competitive market economy, as the one we have embarked upon since 1991-92, the manufacturer's self interest lies in producing more and selling it at competitive prices - the urge to grow. A favourable decision does not m .....

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, approval of price lists or the benefit of exemption notifications. The disincentive, if any, would not be significant. In this context, it would be relevant to point out that the position was no different under Rule 11, or for that matter Section 11-B, prior to its amendment in 1991. Subrules (3) and (4) of Rule 11 (as it obtained between 6-8-1977 and 17-11-1980) read together indicate that even a claim for refund arising as a result of an appellate or other order of a superior court/authority .....

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ction (3) of Section 11-B (prior to 1991) did not say that refund claims arising out of or as a result of the orders of a superior authority or court are outside the purview of Rule 11/Section 11-B. They only dispensed with the requirement of an application by the person concerned which consequentially meant nonapplication of the rule of limitation; otherwise, in all other respects, even such refund claims had to be dealt with under Rule 11/Section 11-B alone. That is the plain meaning of sub-ru .....

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