Sony Pictures Networks India Pvt. Ltd vs The Union Of India on 1 September, 2016

[Cites 10, Cited by 5]

Kerala High Court

Sony Pictures Networks India Pvt. Ltd vs The Union Of India on 1 September, 2016

The short question raised by the petitioner in this writ petition is whether the petitioner is entitled to get interest at the rate of 12% per annum on refund of pre-deposit of Rs.1,15,15,214/- granted to the petitioner after the expiry of three months from the date of the order passed by the appellate Tribunal that is 18.11.2002 till the date of actual refund along with further interest on the delayed payment of interest.

2. Brief facts required for the disposal of the writ petition are as follows:-

Petitioner is a private limited company incorporated under the Companies Act, 1956. During the period June 2000 to February 2001 petitioner imported 4500 numbers of satellite receivers and classified the same under the heading 8525.20 of the Customs Tariff, for which they were allowed clearance at the concessional rate of duty W.P.(C)No.39089 of 2016 2 under Notification 49/2000 - Cus dated 27.04.2000 under the Export Promotion of Capital Goods scheme, subject to the fulfillment of export obligation.

3. Subsequently, when petitioner's licence under the aforesaid scheme was cancelled by the Director General of Foreign Trade, it was issued with a notice by the Department requiring to pay differential duty for the sum of Rs.5,07,09,527/- as per the classification under heading 85.28 of the Customs Tariff, due to which petitioner paid the duty liability of Rs.3,81,16,852/-. The Deputy Commissioner confirmed the demand of differential duty and being aggrieved, petitioner preferred an appeal before the Commissioner(Appeals). During the pendency of the Appeal as per provisions of Section 129E of the Act, petitioner paid an amount of Rs.1,15,15,214/- under protest in respect of the demand confirmed in the order. The Commissioner (Appeals) upheld the classification under the Custom Tariff heading 85.28 against which petitioner preferred an appeal before the W.P.(C)No.39089 of 2016 3 appellate Tribunal.

4. The appellate Tribunal allowed the appeal in favour of the petitioner vide order dated 18.11.2002. The appeal filed by the Revenue against this order was dismissed by the Supreme Court as per Ext.P5 order dated 28.07.2015, while directing that the excess duty paid by the petitioner be refunded to it. According to the petitioner, it has submitted Ext.P6 application dated 01.10.2015 seeking refund of the amount of Rs.1,15,15,214/-. Thereupon 3rd respondent as per Exts.P7 & P8 letter dated 28.10.2015 and 28.12.2015 directed the petitioner to produce various documents to process the application. In response petitioner filed Ext.P9 reply in detail and submitted documents to the extent available. Third respondent, on claiming of the refund of duty, paid under protest, issued show cause notice dated 01.02.2016 to the petitioner alleging unjust enrichment stating that the requisite documents were not submitted, evident from Ext.P10. A reply was submitted W.P.(C)No.39089 of 2016 4 through advocate dated 24.02.2016 evident from Ext.P11. Ext.P13 interest calculation statement was also provided by the petitioner.

5. Against the said notice petitioner filed W.P.(C) No.10019/2016 and secured Ext.P12 judgment, whereby this Court directed the 3rd respondent to grant the refund along with applicable interest to the petitioner within one month from the date of the order. Accordingly petitioner received the refund cheque for Rs.1,15,15,214, along with a cheque towards interest for an amount of Rs.5,69,766/- and a letter stating that, as per para 4 of CBEC circular No.802/35/2004-CX dated 08.12.2004, pre-deposit has to be returned within 3 months from the date of receipt of the final order of the court, and the order of the Supreme Court in the present case, which was received at the office of CBEC on 4.08.2016. And therefore petitioner shall be eligible for interest from 04.11.2016 alone at 6% per annum, to which petitioner has submitted Ext.P18 reply claiming interest at 12% on W.P.(C)No.39089 of 2016 5 expiry of three months from the date of the order by the Tribunal ie, 18.11.2002 and sought requantification of the interest component accordingly. Since there was no response, Ext.P19 lawyer notice was issued. However as per Ext.P20, 3rd respondent informed the petitioner that appropriate clarification is sought from the Commissioner of Central Excise and Customs, Thiruvananthapuram. In the interim, cheque issued towards interest was dishonoured and on intimation a fresh cheque was issued for the said amounts, which also had some complication initially, however sorted out and cheque was honoured. But in spite of all these efforts there was no response and as a last attempt, Ext.P23 lawyer notice was issued. To the said notice Ext.P24 letter was issued by 3rd respondent stating that appropriate interest was provided to the petitioner. However the applicable interest under law as claimed by the petitioner is not paid to it, despite several written and verbal requests. According to the petitioner, the inaction of the 3rd respondent in not W.P.(C)No.39089 of 2016 6 granting the interest is in direct conflict with the law laid down by the Supreme Court and followed by various courts. Hence seeking appropriate directions, this writ petition is filed.

6. Second and third respondents have filed a detailed counter affidavit virtually admitting the facts and circumstances narrated above in respect of the proceedings that took place. Apart from the same it is contented that respondents admitted the receipt of the advocates letter dated 16.11.2016. However, respondent in a way has become functus officio on matters relating to payment of any further interest and the refund amount along with interest has already been sanctioned to the petitioner as per the order of this Court stipulated in Circular No.275/37/2K-CX.8A dated 02.01.2002 read with circular dated 8.12.2004. In the light of the said fact, letters received from the petitioners were forwarded seeking legal opinion in the matter. Subsequently legal opinion was received that no further interest need be paid W.P.(C)No.39089 of 2016 7 to the instant case and the same was communicated to the petitioner as per letter dated 23.11.2016.

7. That apart it is contented that as per the interest stipulated in the circular specified above the pre- deposit has to be returned, within three months from the date of receipt of the order of the court, the Honourable Supreme Court in the instant case. The order of the Supreme Court settling the classification dispute in the instant case was received at the office of the Central Board of Excise and customs on 04.08.2015. Hence the petitioner become eligible for interest from 04.11.2015 and accordingly applicable interest was paid to the petitioner as per the notification dated 12.09.2003. It is further contented that the Supreme Court by its judgment dated 28.07.2015 classified the satellite receiver under CTH 8525.20 and ordered that the excess duty paid by the petitioner shall be refunded in accordance with law and thus the issue of classification is conclusively settled by the Supreme Court and directed to refund excess duty W.P.(C)No.39089 of 2016 8 paid by the petitioner in accordance with law. Petitioner has filed refund application on 01.10.2015 which was received at the office of the respondents on 16.10.2015 for refund of the customs duty paid under protest. It is also stated that petitioner submitted a letter asking for the refund of differential duty paid for the first time only as per the letter referred to above. No such course of action was adopted by the petitioner after the order passed by the cegat dated 18.11.2002. The circular dated 02.01.2002 of CBEC regarding return of deposits made under Section 35 of Central Excise Act, 1944 and Section 129E of Customs Act, 1962, stipulates that "a simple letter from a person who has made such deposits requesting the return of the deposit along with attested xerox copy of order in appeal or cegat order consequent to which the deposit becomes returnable and an attested xerox copy of the challan in form TR6 evidencing the payment of the amount to such deposit addressed to the concerned Assistant/Deputy Commissioner of Central W.P.(C)No.39089 of 2016 9 Excise or Customs as the case may be, will suffice for the purpose."

8. It is also submitted that when the above circular was in existence after cegat order, no officer could have granted refund suo motu due to (1) Petitioner himself calling the impugned payment as differential duty and (2) Petitioner is not submitting a letter for return or refund of the amount. Therefore according to the respondents any such payment by the then Assistant Commissioner could have been violation of the circular dated 02.01.2002. That apart it is stated that after the judgment of the Supreme Court on 28.7.2015, department requested for certain documents from the petitioner to verify the refund bill. However, petitioner replied that most of the original documents including the bill of entry and challan evidencing payment of differential duty were destroyed in the floods in Mumbai 2005. Thus the non production of the required documents for sanctioning refund under the statute compelled the respondents to issue a show cause W.P.(C)No.39089 of 2016 10 notice to the petitioner, to show cause as to why refund claim should not be rejected on the ground that petitioner had not submitted the required documents for processing the claim and verifying the unjust enrichment part. That apart it is stated that as per Ext.P12 judgment of this Court and on receipt of the indemnity bond on 01.09.2016 the pre-deposit of Rs. 1,15,15,214/- made by the petitioner was returned along with applicable interest on the same date itself, calculating the interest on the basis of the circular dated 02.01.2002. Therefore, according to the respondents everything was done in accordance with law and there is no manner of illegality on the part of the respondents in refunding the amount along with the applicable interest. Other contentions with respect to the case laws put forth by the petitioner is met with by contenting that, the interest rate in the said cases have been ordered by different appellate authority, according to the nature of the said cases and cannot be considered paramateria with the instant case. That apart it is also W.P.(C)No.39089 of 2016 11 stated that the Supreme Court judgment dated 21.09.2004 referred to in the circular where the rate of interest quantified as 12% per annum is to be applied in the instant case cannot be accepted as the facts of the said case are entirely different from this case. As per notification No.75/2003/ Customs/NT dated 12.09.2003 the Central Government has fixed the rate of interest at 6% per annum for the purpose of the said section. Therefore, according to the respondents, petitioner is not entitled to get any relief as sought for in the writ petition.

9. A reply affidavit is filed by the petitioner reiterating the stand adopted in the writ petition. That apart it is contented that in the case of Commissioner of Central Excise v. ITC Limited [2005 (179) E.L.T. 15 (S.C.)] the Supreme Court directed payment of interest at 12% per annum on delayed payment of pre-deposit after the expiry of three months from the date of the favourable order. Thus the third respondent ought to have followed the law and granted appropriate interest to W.P.(C)No.39089 of 2016 12 the petitioner. That apart it is also stated that 3rd respondent was duty bound to implement Ext.P12 judgment of this Court fully and correctly. Other contentions are also raised controverting the statement contained in the counter affidavit filed by respondents 2 and 3 and basing the claim on the principles of law laid down by various courts.

10. Heard learned counsel for the petitioner and learned Standing Counsel appearing for the respondents 2 and 3 and perused the documents on record and pleadings put forth by the respective parties.

11. The questions to be considered are 1) whether the petitioner is entitled to get interest for the delayed payment on expiry of the three months from 18.11.2002 ie. the date of the order of the appellate Tribunal passed in favour of the petitioner, and 2) the rate of applicable interest as per the directions contained in Ext.P12 judgment. The contentions advanced by the learned counsel for the petitioner is that, since the appellate W.P.(C)No.39089 of 2016 13 Tribunal has allowed the appeal preferred by the petitioner, petitioner is entitled to get interest at the rate of 12% from 18.11.2002 as held by the Apex Court in Commissioner of Central Excise (cited supra). On the other hand the contentions advanced by learned Standing Counsel for respondents 2 and 3 is that, the authority has received the order of the Supreme Court only on 04.08.2015 and therefore the authority is liable to pay interest to the petitioner on the expiry of three months from the said date. It is an admitted fact that the petitioner has not submitted any application before the statutory authority seeking refund of the amount when the appeal was allowed by the Tribunal. But, taking into the account the notification, cited supra, the amount can be released to the petitioner on submitting a formal application only.

12. However the notifications dated 02.01.2002 and 08.12.2004 issued in respect of refund/return of deposits made under Section 35F of CEA, 1944 and Section 129E W.P.(C)No.39089 of 2016 14 of Customs Act, 1962 are clear in this regard. The relevant portion of the notification dated 02.01.2002 read thus:-

''Subject : Return of deposits made in terms of Section 35F of the Central Excise Act, 1944 and Section 129E of Customs Act, 1962 - Reg.

The issue relating to refund of pre-deposit made during the pendency of appeal was discussed in the Board meeting. It was decided that since the practice in the Department had all along been to consider such deposits as other than duty, such deposits should be returned in the event the appellant succeeds in appeal or the matter is remanded for fresh adjudication.

2. It would be pertinent to mention that the Revenue had recently filed a Special Leave Petition against Mumbai High Court's order in the matter of NELCO LTD, challenging the grant of interest on delayed refund of pre-deposit as to whether:

(i) the High Court is right in granting interest to the depositor since the law contained in Section 35F of the Act does in no way provide for any type of compensation in the event of an appellant finally succeeding in the appeal, and,

(ii) the refunds so claimed are covered under the provisions of Section 11B of the Act and are governed by the parameters applicable to the claim of refund of duty as the amount is deposited under Section 35F of the Central Excise Act, 944.

The Hon'ble Supreme Court vide its order dated 26.11.2001 dismissed the appeal. Even though the W.P.(C)No.39089 of 2016 15 Apex Court did not spell out the reasons for dismissal, it can well be construed in the light of its earlier judgment in the case os Suvidhe Ltd. and Mahavir Aluminium that the law relating to refund of pre-deposit has become final.

3. In order to attain uniformity and to regulate such refunds it is clarified that refund applications under Section 11B(1) of the Central Excise Act, 1944 or under Section 27(1) of the Customs Act, 1962 need not be insisted upon. A simple letter from the person who has made such deposit, requesting the return of the amount, along with an attested Xerox copy of the order- in appeal or CEGAT order consequent to which the deposit made becomes returnable and an attested Xerox copy of the challan in Form TR6 evidencing the payment of the amount of such deposit, addressed to the concerned Assistant/Deputy Commissioner of Central Excise or Customs, as the case may be, will suffice for the purpose. All pending refund applications already made under the relevant provisions of the Indirect Tax Enactments for return of such deposits and which are pending with the authorities will also be treated as simple letters asking for return of the deposits, and will be processed as such. Similarly, bank guarantees executed in lieu of cash deposits shall also be returned."

13. The same is further clarified in the notification dated 08.12.2004, relevant portion of which read thus:-

"Reference earlier instructions on the above subject and looking to the instances arising out of non-implementation of the judicial orders, the W.P.(C)No.39089 of 2016 16 Board has reason to review and reiterate the earlier Circulars on the subject of non-implementation of orders of CESTAT or any Final Authority in relation to returning pre-deposits made as per directions of CEATAT or any other Final Authority in terms of Section 35F of the Central Excise Act, 1944 & Section 129E of the Customs Act, 1962. The board has taken a strict view with regard to non-returning of such deposits.

2. As we are all aware the CESTAT has in a number of such cases awarded interest on pre-

deposits where it orders have not been implemented and the Department had challenged this and filed Civil Appeals in the Supreme Court.

3. Th Board has noted the observations of the Hon'ble Supreme Court in its order dated 21.09.2004 and has decided that pre-deposits shall be returned within a period of three months of the disposal of the appeals in the assessee's favour.

4. According, the contents of the Circular No.275/37/2000-CX 8A dated 02.01.2002 [2002 (139) E.L.T T138], as to the modalities for return of the pre-deposits are reiterated. It is again reiterated that in terms of Hon'ble Supreme Court's order such pre-deposit must be returned within 3 months from the date of the order passed by the Appellate Tribunal/Court or other Final Authority unless there is a stay on the order of the Final Authority/CESTAT/Court, by a superior Court.

5. Delay beyond this period of three months in such cases will be viewed adversely and appropriate disciplinary action will be initiated W.P.(C)No.39089 of 2016 17 against the concerned defaulting officers. All concerned are requested to note that default will entail an interest liability, if such liability accrues by reason of any orders of the CESTAT/Court, such orders will have to be complied with and it may be recoverable form the concerned officers.

6. All Commissioners may advise implementation of these instructions and ensure their implementation through a suitable monitoring mechanism. Field formation may be suitable informed. Copies of the instruction issued may be endorsed to this office for information."

Therefore on an appreciation of the notifications, it is unequivocally clear that the petitioner is entitled to get refund of the amount within a period of three months of the disposal of the appeals in the assessee's favour. Here the assessee has secured an order from the appellate Tribunal on 18.11.2002 and the refund was pending from the said date. However, in this regard learned counsel for the respondents submitted that, petitioner has made the application after the dismissal of the appeal of the Department by the Apex Court on 28.07.2015 and therefore the Department is liable to refund the amount and pay interest at 6% from the said date. As I have W.P.(C)No.39089 of 2016 18 stated earlier, the manner in which the refund of the money to be made is clear from the notifications ie. within three months of the disposal of the appeals in assessee's favour. Therefore, respondents are liable to refund the amount on expiry of three months from 18.11.2002 to the petitioner ie. the date of the order of the Appellate Tribunal, even if the application was submitted at a later point of time, especially due to the fact that the notifications are not restricting the payment of interest from the date of submission of application.

14. Now, the sole question remains to be considered is what is the nature of interest that the petitioner is entitled to get. As discussed above in the judgment Commissioner of Central Excise v. ITC (supra), the Apex Court confined the interest to 12% and further held that any judgment/decision of any High Court taking contrary view, will be no longer good law. The said judgment is rendered, in my considered opinion under similar circumstances. So also in Kuil Fire Works W.P.(C)No.39089 of 2016 19 Industries v. Collector of Central of Excise [1997 (95) ELT 3 ( SC), the pre-deposit made by the assessee was directed to be returned to him with 12% interest. I have also come across the judgment of the Calcutta High Court in Madura Coats Pvt. Ltd. v. Commissioner of C. Ex., Kolkata - IV [2012 (285) E.L.T. 188 (Cal.), wherein the peremptory directions of the Apex Court in the judgment of ITC Ltd. (supra) was considered and ordered 12 % interest, and further held that when the High Court directed the respondents to pay interest to the appellant in terms of the circular dated 08.12.2004 on the pre-deposit of the delayed refund within two months, it has to be construed that, the court meant the rate of interest which was awarded by the Supreme Court in the case of Commissioner of Central Excise v. ITC Ltd, which was the rate quantified by the Supreme Court in the absence of any statutory provisions in the Act in question. Even though various other judgments of various High Courts and the various Tribunals was brought to my notice W.P.(C)No.39089 of 2016 20 awarding 15% interest, in view of the directions contained in the judgment of the Apex Court in Commissioner of Central Excise v. ITC Ltd (supra) rate of interest is to be confined to 12%. I am also bound to follow the same. Therefore the interest that is liable to be paid by the respondents as per the directions of this Court in Ext.P12 judgment is fixed at 12% per annum.

15. Taking note of the compendious circumstances and reckoning the law, there will be a direction to the respondents to pay interest to the petitioner at 12% from the date of expiry of three months from 18.11.2002, to the amount of refund already made, within a month from the date of receipt of a copy of this judgment, after adjusting any interest paid.

Writ petition is disposed of accordingly.

Sd/-

SHAJI P. CHALY, JUDGE.

rmm/28/3/2017

Unlock Advanced Research with PRISMAI

Kerala High Court