TMI Blog2000 (4) TMI 50X X X X Extracts X X X X X X X X Extracts X X X X ..... ter losing the appeal which was filed in the Supreme Court, being the amount of refund of duty and interst, which the petitioner had obtained under a decree passed by the Civil Court. 2.2In Special Civil Application No. 1145 of 1998, the petitioner in respect of its Nadiad unit, has challenged similar recovery of interest at the higher rate of 20% under Section 11AA of the Central Excise Act, 1944 and the demand made on that basis under the impugned letters dated 10th August, 1998 and 30th October, 1998 at Annexures "P" and "Q" to the petition, on the ground that such recovery was beyond the purview of Section 11AA, read with Section 11A(2) of the said Act. 3.The petitioners had filed suits, which came to be decreed by the Civil Courts for refund of the excise duty, which was held by the High Court not leviable on blended yarn, prior to the insertion of the Tariff Item No. 18(E) on 16-3-1972. 3.1In Civil Suit No. 21 of 1979, which was filed by the petitioner in the Court of Civil Judge (Senior Division), Navsari, the Court had passed the following decretal order on 16-6-1980. "The defendants shall pay Rs. 1,66,02,357/- together with interest at the rate of 12% per annum ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion Nos. 1 to 4 of the Format Order did not apply to the petitioner's case. Direction 7(a) of the Format Order reads as under : - "(7)(a) - Where the refund claim is rejected by this Court the assessee who has already obtained any amount by way of refund shall be liable to pay back the same to the Department and the Department shall be entitled to recover the same in accordance with law." 5.2Therefore, the petitioner-Company became liable to pay back the amounts, which it had obtained by way of refund, to the Department and the Department became entitled to recover them in accordance with law, as stated in direction (7)(a) of the Format Order. This means, as stipulated in the interim order dated 14-8-1984, the Department became entitled to the refund of the decretal amounts already paid to the petitioner, together with interest at the rate of 12 per cent per annum, on such decretal amount from the dates when they were recovered, until repayments. Such recovery could be effected in accordance with law, which means either under Section 11 of the Central Excise Act, 1944 or by filing a restitution proceeding under Section 144 of the Civil Procedure Code before the Court whose ord ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llectively) seeking thirty-six equal monthly instalments and the subsequent representation dated 11-3-1997 (Annexure "C" collectively) made after a meeting with the Commissioner to him, seeking ten to twelve instalments for the repayment, the Department wrote a letter dated 29-5-1997 (Annexure "D" to the petition - page 36), to the petitioner with a copy of the letter dated 24th April, 1997 of the Supdt. of Central Excise to the Commissioner, stating that the petitioner-Company was permitted to pay the balance amount in 12 monthly instalments on a condition that the rate of interest was to be charged after 26-8-1995 at the rate of 20% per annum as per the provisions of Section 11AA of the Central Excise Act. The letter of the Department dated 30-5-1997 to the petitioner specified the amounts of instalments and the requirement of payment of 20% interest, to the petitioner. On 30-5-1997, the petitioner wrote a letter at Annexure "E", objecting to the condition of interest rate of 20 per cent, which was imposed with effect from 26th August, 1995, purportedly under Section 11AA of the Act. It was pointed out that the judgment of the Hon'ble Supreme Court was rendered on 4-2-1997 and th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s, the petitioner received a letter from the Assistant Commissioner of Central Excise, dated 30th April, 1997, at Annexure "E" to the petition, stating that the Commissioner of Central Excise and Customs, Vadodara had granted the permission to pay up the balance amount including interest in twelve monthly instalments. According to the petitioner, it had paid Rs. 12,51,69,240/- between 13th March, 1997 and 6th March, 1998. There was admittedly no reference made to payment of interest at the rate of 20 per cent under Section 11AA of the Act in the permission granted by the Commissioner to make payments by 12 monthly instalments. Still however, on 18-3-1998, the Supdt. of Central Excise, Nadiad wrote a letter at Annexure "F" to the petition, stating that the petitioner was liable to pay Rs. 1,64,30,105.87 as interest accrued from 1-1-1997 to 18-3-1998 at the rate of 20 per cent per annum on the reducing amount which had to be paid as per Section 11AB of the Central Excise Act. In response to that letter, the petitioner replied on 20-3-1998 (Annexure "G" to the petition) that Section 11AB did not apply to the petitioner's case and in view of the direction of the Hon'ble Supreme Court t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1998 (Annexure "P" collectively). After the decision of the Hon'ble (B.1) Supreme Court, the respondent had filed application Exhibits 79 and 80 in the Court of Civil Judge (Senior Division), Nadiad for release of the bank guarantee dated 10-10-1999 for Rs. 10 crores, which was furnished by the petitioner pursuant to the order dated 14-8-1984 of the Supreme Court. The Trial Court made orders on these applications from time to time which are placed on record by the learned Counsel. On 19-6-1997, the petitioner made application Ex. 102 in respect of the respondent's applications Exhibits 79 and 80, pointing out that pursuant to the petitioner's request, the respondent had granted permission to pay the balance amount including interest in 12 monthly instalments beginning from April, 1997. The petitioner's representation dated 26th March, 1997 - Exh. 102/A and the Commissioner's permission dated 30-4-1997 at Exh. 102/B were brought to the notice of the Trial Court and the Court was requested to dispose of the applications Exhs. 79 and 80 in terms of the agreement arrived at between the parties. By order below Ex. 102 made on 19-6-1997, the Trial Court granted the application leaving ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... above in the order dated 30-4-1997 at Annexure "E" of Special Civil Application No. 1145/99 granting instalments, the Commissioner of Central Excise and Customs, Vadodara did not impose any condition of payment of interest at the rate of 20 per cent per annum from any date, much less from 26-8-1995. 9.Thus, in the two cases governed by the same order of the Hon'ble Supreme Court, falling within the jurisdiction of the Chiefs Commissioner of Central Excise and Customs, Vadodara, different stands are taken by the Nadiad and Navsari offices of the Department regarding the date of applicability of the rate of interest under Section 11AA of the Act. In one case, it is made applicable from 26-8-1995 being three months after Section 11AA was enacted with effect from 26-5-1995, while in the other case from 1-1-1997. In fact there was no scope for applying the higher rate of interest of 20 per cent in either of these two cases, because the Hon'ble Supreme Court had already ordered that repayments were to be made with interest at the rate of 12 per cent per annum from the date of the recovery of the refund till the dates of such repayments. This was the way already charted out by the Supr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... five years in cases of fraud, etc.) from the relevant date on the person chargeable to duty, to show cause as to why he should not pay the amount specified in the notice. Admittedly, no such question arose in these cases for taking steps for recovery of erroneous refund and no show cause notice was ever given under Section 11A of the said Act. Section 11AA on which reliance is placed by the department comes into play only when duty is determined under Section 11A(2) and there is failure of payment of such duty within three months. Then only the person chargeable would become liable to pay interest as may be fixed by the Board, between ten and thirty per cent (which is 20%) on such duty. As admittedly there had been no determination made under Section 11A(2) of the Act, there was no scope for applying the rate of 20% under Section 11AA or under Section 11AB of the Act. 11. The rate of 20% is clearly resorted to by the respondents with reference to Section 11AA of the Act and not dehors it by way of any contractual stipulation. Hence, the faint attempt made during arguments on behalf of the respondents to dissociate the rate of 20 per cent from Section 11AA as if it was an independ ..... X X X X Extracts X X X X X X X X Extracts X X X X
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