Custom, Excise & Service Tax Tribunal
Ms P G Electroplast vs Greater Noida, Gautam Buddh Nagar on 17 December, 2024
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL
ALLAHABAD
REGIONAL BENCH - COURT NO.I
Customs Appeal No.70712 of 2021
(Arising out of Order-in-Appeal No.NOI-CUSTM-000-APP-731-20-21 dated
08/10/2020 passed by Commissioner (Appeals) Customs, Central Excise &
Service Tax, Noida)
M/s P.G. Electroplast, .....Appellant
(P-4/2 to 4/6, Site-B, UPSIDC,
Industrial Area, Surajpur, Noida)
VERSUS
Commissioner of Customs, Noida ....Respondent
(Concor Complex, Container Depot, Noida)
APPEARANCE:
Shri Sharad Chandra Tewari, Advocate for the Appellant
Shri Manish Raj, Authorised Representative for the Respondent
CORAM: HON'BLE MR. SANJIV SRIVASTAVA, MEMBER (TECHNICAL)
FINAL ORDER NO.70857/2024
DATE OF HEARING : 12 September, 2024
DATE OF PRONOUNCEMENT : 17 December, 2024
SANJIV SRIVASTAVA:
This appeal is directed against Order-in-Appeal No. NOI-
CUSTM-000-APP-731-20-21 dated 08/10/2020 of the Principal
Commissioner, CGST (Appeals), Noida. By the impugned order
following has been held:
"9. In view of the above discussions and findings, the
impugned Memorandum Order No. 92/Refund/Noida/2019
dated 07/1 1/2019 is set aside and the appellant is entitled
to refund of Rs. 1,45,00,000/- with appropriate interest in
terms of Section 27 and 27A of the Customs Act 1962, as
amended."
Customs Appeal No.70712 of 2021
2
2.1 An enquiry was conducted by the DRI against the
appellant on the suspicion that they are trying to evade anti
dumping duty in respect of Colour Picture Tubes imported by
them from M/s Chunghwa Picture Tubes, Malaysia during the
period from May 2010 to January 201 1. During the
investigation appellant had deposited Anti Dumping Duty(ADD)
amounting to Rs. 1,45,00,000/-.
2.2 On completion of investigations/ enquiries, a show cause
notice no. 29/2015 dated 29.5.2015 was issued to the appellant.
Principal Commissioner Noida Customs vide OIO No. 03/Pr.
Commr./Noida-Cus./2017 dated 28.02.2017 confirmed the full
demand of Rs. 7,38,54,123/- towards anti-dumping duty along
with interest and imposed equivalent penalty on the appellant
under Section 114A of the Customs Act, 1962. Further, penalty
of Rs. 1 crore was also imposed on the appellant company under
Section 114AA of the Customs Act, 1962. Personal penalty of
Rs. 1 crore was also imposed on Shri Vishal Gupta, Director
under Section 112(a) of the Customs Act, 1962 and further
penalty of Rs. 50 Lakhs under Section 114AA of the Customs
Act, 1962.
2.3 The order in original was set-aside by CESTAT, Allahabad
vide Final Order No. 71124-71125/2019 dated 18.06.2019.
2.4 Appellant filed a refund claim of Rs. 1,45,00,000/- being
the ADD deposited by them during the course of investigation.
The said refund claim was disposed of by the Deputy
Commissioner, Noida Customs Commissionerate vide
Memorandum Order No. 92/Refund/Noida Customs/2019 dated
7.11.2019, observing that claim was filed well within time limit
and was also not hit by unjust enrichment clause and as on date
there was no stay on the operation of the said CESTAT Final
order and claim of refund is free from any restrain. By taking
cognizance of the CBIC Circular No. 695/11/2003-Cx dated
24.2.2003, refund sanctioning authority against the claimed
amount of Rs. 1,45,00,000/- , sanctioned refund claim to the
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3
tune of Rs. 55,39,059/- only which was equivalent to the amount
of pre-deposit 7.5% of the disputed duty.
2.5 Aggrieved by the said orders dated 7.11.2019, appellant
filed appeal before the Commissioner (Appeal), which has been
decided as per the impugned order.
2.6 Aggrieved appellant have filed this appeal seeking refund
from the date of deposit of the said amounts and not as per the
provision of Section 27 and 27A of the Customs Act, 1962.
3.1 I have heard Shri Sharad Chandra Tewari Advocate for the
appellant and Shri Manish Raj, Authorized Representative for the
revenue.
3.2 Arguing for the appellant learned counsel submits that:
The order in original dated 28.02.2017 passed by the
Commissioner merged in the final order of CESTAT dated
18.06.2019. The amount of Rs 1,45,00,000/- forcefully got
deposited did not acquired the form of Custom Duty and
was "revenue" or a "mere deposit", hence provisions of
Section 27A will not come into picture. Reliance placed on
following:
o Indian Humes & Pipe Co Ltd. [2015 (320) ELT 258
(Mad)]
o S S Rathore [1989 (43) ELT 790 (SC)]
o Kunhayammed [2001 (129) ELT 11 (SC)]
Thus the findings recorded in the impugned order in
respect of applicability of Section 27A are not correct.
Relaince is alos placed on the following decisions:
o Parle Agro Pvt Ltd [2022 (380) ELT 219 (T-ALL)]
o Sreem Overseas Ltd. [2021 (378) ELT 641 (T-
Chennai)]
o Lavin Synthetics Pvt Ltd [2020 (374) ELT 759 (T-
Mum)]
o Vikram Ispat [2009 (234_ ELT 74 (Bom)]
o Team HR Services Pvt Ltd [2020 (38) GSTL 457
(Del)]
o R S Enterprises [2023 (384) ELT 711 (T-Del)]
Customs Appeal No.70712 of 2021
4
o Hello Mineral Water [2004 (174) ELT 422 (ALL)]
o Sandvik Asia Ltd [2007 (8) STR 193 (SC)]
o Om jai Bhavani Silk Mills P Ltd. [2009 (243) ELT 560
(T-Bang)]
o
In view of the above decisions appellant are entitled to
interest from the date of deposit till the date of refund.
3.3 Authorized representative reiterated the findings recorded
in the impugned order.
4.1 I have considered the impugned order along with the
submissions made in appeal and during the course of argument.
4.2 Impugned order records following findings in respect of the
issue on hand:
―8. The appellant, in his appeal petition, claimed interest
from the date of deposit of the said amount. However, I
find that there is no provision under Customs Act 1962 to
call an amount paid during investigations as 'Deposit'.
Amount so paid is towards probable 'Duty' liability only and
in adjudication order, same is appropriated as duty only,
Moreover, the Hon'ble Supreme Court of India, in the case
of CIT, Gujarat vs. Gujarat Fluoro Chemicals, reported in
[2013 (296) E.L.T. 433 (S.C.)] has held that - "Refund -
Interest on delayed refund only when statute provides - It
is only_ interest provided under statute which can be
claimed by assessee from Revenue and no other interest on
such statutory interest Therefore, appellant's claim for
interest from the date of deposit is not entertainable.
However, in case said amount requires to be refunded after
adjudication, provisions of Section 27 of the Customs Act
1962 would be applicable and for interest on delayed
refund, provisions of Section 27A ibid would be applicable.
Accordingly date of filing refund claim is relevant date for
computation of interest if made after three months and not
date of making deposit. This position is well settled by the
Hon'ble Supreme Court of India in the case of Ranbaxy
Customs Appeal No.70712 of 2021
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Laboratories Ltd. vs. UOI, reported in [2011 (273) E.L.T. 3
(S.C.)] wherein it is held that - "Interest on delayed refund
- Interest on delayed refund is payable under Section 11BB
of Central Excise Act, 1944 on the expiring of period of
three months from the date of receipt of application under
Section 11B(1) ibid and not from the date of order of refund
or Appellate Order allowing such refund". Therefore, in the
instant case, the adjudicating authority is required to
calculate the interest at prescribed rate under Section 27A
of the Customs Act from the date immediately after the
expiry of three months from the date of receipt of the
refund applications till the date of refund of such duty.‖
4.3 It is settled position in law that interest on any amount
deposited arises on two accounts - either as contractual liability
or as statutory liability (prescribed by the statute). Appellant has
not shown anything by which it can be shown that the interest
being claimed by them is in terms of any contract entered
between them and the DRI or the Customs Department. The
interest being claimed has arisen as a result of the provisions of
statute. As per the appellants own submissions in the appeal
filed by the appellant, the amount claimed as refund has been
deposited by them during the 2011. The details of deposit made
are reproduced below:
S Pay Order/ DD No and date Challan Amount Remarks
No date
1 DD 920981 dated 09.03.2011 7500000 Three DD of Rs
09.03.2011 25,00,000/- was
collected by the
2 DD 920982 dated
officer
09.03.2011
3 DD 920983 dated
09.03.2011
4 Pay Order 055499 dated 06.05.2011 2500000
13.04.2011
5 Pay Order 056121 dated 25.05.2011 1500000
23.05.2011
6 Pay Order 921542 dated 25.05.2011 1500000
23.05.2011
7 Pay Order 122653 dated 20.09.2011 1500000
20.09.2011
Total 14500000
Customs Appeal No.70712 of 2021
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4.4 Even if the claim of the appellant is accepted that the
amount deposited by them should be treated as "deposit" or as
"revenue deposit", then alos the interest provisions as provided
by Section 129EE of the Customs Act, 1962 as it existed on the
dated of deposit shall be applicable. Section 129EE prior to its
substitution by Finance Act (No 2) 2014 with effect from
06.08.2014 read as follows:
―129EE Interest on delayed refund of amount
deposited under the proviso to Section 129E
Where an amount deposited by the appellant in pursuance
of an order passed by the Commissioner (Appeals) or the
Appellate Tribunal (hereinafter referred to as appellate
authority), under the first proviso to Section 129 E, is
required to be refunded consequent upon the order of the
appellate authority and such amount is not refunded within
three months from the date of communication of such order
to the adjudicating authority, unless the operation of the
order of the appellate authority is stayed by a superior court
or tribunal, there shall be paid to the appellant interest at
the rate specified in section 27A after the expiry of three
months from the date of communication of the order of the
appellate authority, till the date of refund of such amount.‖
Further proviso to the section 129EE as inserted with effect from
06.08.2014, specifically reads as follows:
"Provided that the amount deposited under Section
129 E, prior to the commencement of Finance Act (No
2) Act, 2014 shall be governed by the provisions of
Section 129 E as it stood before the commencement
of the said Act."
It is settled principle in law that when the statute prescribes a
manner of performance of an act then that is only method of
performance all other methods are necessary barred. When the
statute prescribed manner of computation of interest on the said
deposits, then that would be only available method and all other
Customs Appeal No.70712 of 2021
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methods are necessary barred. In this case interest has been
prescribed at the rate as prescribed under section 27A for the
period after three months from the date of communication of the
appellate authority to adjudicating authority to the date of refund.
Further by proviso to the Section129EE as substituted with effect
from 06.08.2014 the application of inserted section 129EE has been
barred in case of all deposits made prior to such insertion.
Admittedly all the amounts claimed as refunds were deposited in
the year 2011 much prior to 06.08.2014 and hence the interest
could not have been granted in terms of this section from the date
of deposit. These principals have specifically been elaborately
explained by Hon'ble Supreme Court in case Gujarat Fluoro
Chemicals and Willowood Chemical Pvt Ltd., referred extensively in
case of Jindal Pipes Ltd referred in para 4.6. Hon'ble Allahabad High
Court has in case of Kurele Pan Products Pvt. Ltd. [2015 (323) ELT
686 (All)] held that there substitute made from 06.08.2014 are
prospective.
4.5 It is also settled principle in law that tribunal being creature
of statute cannot go beyond the provisions of the statute. Any order
which has taken contrary view is beyond the jurisdiction vested in
tribunal and hence should be treated as nullity. The case of Parle Agro
relied upon by the appellant was in respect of deposit made on
01.12.2005. Section 129EE was inserted in the Customs Act, 1962 by
Section 73 of the Finance Act, 208 (Act 18 of 2008). Prior to insertion
of this section there was no specific provision in respect of interest o n
the deposits made, and sought to be refunded as per the decisions of
the appellate authority. Nearly all the decisions referred to by the
appellant are in respect of the deposits made prior to this insertion,
hence are distinguishable.
4.6 I have considered all the arguments further advanced by the
appellant and the decisions relied upon by the appellant, in the
case of Jindal Pipes Ltd. [Final Order No 70535/20124 dated
08.04.2024 in Excise Appeal No.70403 of 2020] and have observed
as follows:
4.3 Appellant has filed this appeal assailing the above order
and have claimed the refund from the date of deposit and at
rate of 12%. They have claimed the same on the
basis of decision of Cahndigarh bench in case of Riba Textiles Ltd
[Final Order No 60115/2020 dated 17.01.2020]
―6. On going through the decision cited by learned A.R. in
the case of M/s Juhu Beach Resort Ltd (supra), I find that
in the said case, the decision of Hon'ble Apex Court in the
case of Sandvik Asia Ltd 3 Excise Appeal No. 60446 of
2018 vs. CIT, Pune - 2007 (8) STR 193 (SC) and the
decision of Hon'ble High Court of Madras in the case of
CCE, Chennai-II vs. UCAL Fuel Systems Ltd - 2014 (306)
ELT 26 (Mad.) have not been considered. Therefore, the
said decision cannot be relied upon. As in the case of M/s
Marshall Foundry & Engg. Pvt. Ltd. (supra), this Tribunal
has examined all said decisions and thereafter observed
as under:
―8. The said issue has been examined by this Tribunal in
the case of Tribunal in the case M/s. Fujikawa Power and
other vs. CCE, Chandigarh-I vide Final Order No. 61041-
61042/2019 dt.26.11.2019 wherein this Tribunal has
observed as under:-
14. I have gone through the decision in the case of
Sandvik Asia Limited (supra), wherein the section 243
dealt with situation of interest on delayed refund.
15. For better appreciation, section 243 of the Income
Tax Act, 1961 reproduced as under:-
―243. Interest on delayed refunds-
(1) if the Income tax officer does not grant refund-
(a) In any case where the total income of the assessee
does not consist solely of income from interest on
securities or dividend, within three months from the end
of the month in which the total income is determined
under this Act, and
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(b) In any other case, within three months from the end
of the month in which the claim for refund is made under
this Chapter, the Central Government shall pay the
assessee simple interest at (twelve) per cent per annum
on the amount directed to be refunded from the date
immediately following the expiry of the period of three
months aforesaid to the date of the order granting the
refund.
Explanation: If the delay in granting the refund within the
period of three months aforesaid is attributable to the
assessee, whether wholly or in part, the period of the
delay attributable to him shall be excluded from the
period for which interest is payable.‖
16. Section 35FF of the Central Excise Act, 1944 deals
with the situation in hand, the same is extracted below:-
―Section 35FF. Interest on delayed refund of amount
deposited under the proviso to Section 35F-
Where an amount deposited by the appellant in
pursuance of an order passed by the Commissioner
(Appeals) or the Appellate Tribunal (hereinafter referred
to as the appellate authority) under the first proviso to
section 35F, is required to be refunded consequent upon
the order of the appellate authority and such amount is
not refunded within three months from the date of
communication of such order to the adjudicating
authority, unless the operation of the order of the
appellate authority is stayed by a superior court or
tribunal, there shall be paid to the appellant interest at
the rate specified in section 11BB after the expiry of three
months from the date of communication of the order of
the appellate authority, till the date of refund of such
amount.‖
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17. On-going through the provisions of both Income Tax
Act, 1961 and Central Excise Act, 1944, the interest on
delayed refund is payable after expiry of 3 months from
the date of granting refund or from the date of
communication of order of the appellate authority, which
are parimateria. Therefore, the decision of Hon‟ble Apex
Court in the case of Sandvik Asia Ltd. (supra) is law of
land, in terms of Article 14 of the Constitution of India
which is to be followed by me, wherein the Hon‟ble Apex
has observed as under:-
―45. The facts and the law referred to in paragraph
(supra) would clearly go to show that the appellant was
undisputably entitled to interest under Sections 214 and
244 of the Act as held by the various High Courts and
also of this Court. In the instant case, the appellant's
money had been unjustifiably withheld by the Department
for 17 years without any rhyme or reason. The interest
was paid only at the instance and the intervention of this
Court in Civil Appeal No. 1887 of 1992 dated 30.04.1997.
Interest on delayed payment of refund was not paid to
the appellant on 27.03.1981 and 30.04.1986 due to the
erroneous view that had been taken by the officials of the
respondents. Interest on refund was granted to the
appellant after a substantial lapse of time and hence it
should be entitled to compensation for this period of
delay. The High Court has failed to appreciate that while
charging interest from the assesses, the Department first
adjusts the amount paid towards interest so that the
principle amount of tax payable remain outstanding and
they are entitled to charge interest till the entire
outstanding is paid. But when it comes to granting of
interest on refund of taxes, the refunds are first adjusted
towards the taxes and then the balance towards interest.
Hence as per the stand that the Department takes they
are liable to pay interest only upto the date of refund of
Customs Appeal No.70712 of 2021
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tax while they take the benefit of assesses funds by
delaying the payment of interest on refunds without
incurring any further liability to pay interest. This stand
taken by the respondents is discriminatory in nature and
thereby causing great prejudice to the lakhs and lakhs of
assesses. Very large number of assesses are adversely
affected inasmuch as the Income Tax Department can
now simply refuse to pay to the assesses amounts of
interest lawfully and admittedly due to that as has
happened in the instant case. It is a case of the appellant
as set out above in the instant case for the assessment
year 1978-79, it has been deprived of an amount of Rs.40
lakhs for no fault of its own and exclusively because of
the admittedly unlawful actions of the Income Tax
Department for periods ranging up to 17 years without
any compensation whatsoever from the Department.
Such actions and consequences, in our opinion, seriously
affected the administration of justice and the rule of law.
COMPENSATION:
46. The word 'Compensation' has been defined in P.
RamanathaAiyar's Advanced Law Lexicon 3rd Edition
2005 page 918 as follows: "An act which a Court orders
to be done, or money which a Court orders to be paid, by
a person whose acts or omissions have caused loss or
injury to another in order that thereby the person
damnified may receive equal value for his loss, or be
made whole in respect of his injury; the consideration or
price of a privilege purchased; some thing given or
obtained as an equivalent; the rendering of an equivalent
in value or amount; an equivalent given for property
taken or for an injury done to another; the giving back an
equivalent in either money which is but the measure of
value, or in actual value otherwise conferred; a
recompense in value; a recompense given for a thing
received recompense for the whole injury suffered; 6
Customs Appeal No.70712 of 2021
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Excise Appeal No. 60446 of 2018 remuneration or
satisfaction for injury or damage of every description;
remuneration for loss of time, necessary expenditures,
and for permanent disability if such be the result;
remuneration for the injury directly and proximately
caused by a breach of contract or duty; remuneration or
wages given to an employee or officer."
47. There cannot be any doubt that the award of interest
on the refunded amount is as per the statute provisions of
law as it then stood and on the peculiar facts and
circumstances of each case. When a specific provision has
been made under the statute, such provision has to
govern the field. Therefore, the Court has to take all
relevant factors into consideration while awarding the rate
of interest on the compensation.
48. This is the fit and proper case in which action should
be initiated against all the officers concerned who were all
in charge of this case at the appropriate and relevant
point of time and because of whose inaction the appellant
was made to suffer both financially and mentally, even
though the amount was liable to be refunded in the year
1986 and even prior to. A copy of this judgment will be
forwarded to the Hon'ble Minister for Finance for his
perusal and further appropriate action against the erring
officials on whose lethargic and adamant attitude the
Department has to suffer financially.
49. By allowing this appeal, the Income-tax Department
would have to pay a huge sum of money by way of
compensation at the rate specified in the Act, varying
from 12% to 15% which would be on the high side.
Though, we hold that the Department is solely
responsible for the delayed payment, we feel that the
interest of justice would be amply met if we order
payment of simple interest @ 9% p.a. from the date it
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became payable till the date it is actually paid. Even
though the appellant is entitled to interest prior to
31.03.1986, learned counsel for the appellant fairly
restricted his claim towards interest from 31.03.1986 to
27.03.1998 on which date a sum of Rs.40,84,906/- was
refunded.
50. The assessment years in question in the four appeals
are the assessment years 1977-78, 1978-79, 1981-82
and 1982-83. Already the matter was pending for more
than two decades. We, therefore, direct the respondents
herein to pay the interest on Rs.40,84,906 (rounded of to
Rs.40,84,900) simple interest @ 9% p.a. from
31.03.1986 to 27.03.1998 within one month from today
failing which the Department shall pay the penal interest
@ 15% p.a. for the above said period.‖
18. As the Hon‟ble Apex Court has answered the issue
holding that the assessee is entitled to claim interest from
the date of payment of initial amount till the date its
refund. Therefore, I hold that the appellants are entitled
to claim the interest on delayed refund from the date of
deposit till its realization.
19. Further, the interest on the refund shall be payable @
12% per annum as held by Hon‟ble Kerala High Court in
the case of Sony Pictures Networks India Pvt.Ltd.-2017
(353) ELT 179 (Ker.) wherein it has held as under:-
―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 Industries v.
Customs Appeal No.70712 of 2021
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Collector of Central of Excise [1997 (95) E.L.T. 3 (S.C.),
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 8-12-2004 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
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.‖
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20. Further, the same view was taken in the case
Ghaziabad Ship Breakers Pvt.Ltd.-2010 (260) ELT 274
(Tri.Ahmd.), wherein this Tribunal observed as under:-
―5. I have considered the submissions made by both the
sides. I notice that appellants deposited amount in
September, October and in November 2004, as per the
directions of the department. In September 2004, the
Hon‟ble Gujarat High Court had dismissed the SCA filed
by the appellants against the order of the Tribunal
rejecting the appeal for failure to make the pre-deposit.
This SCA was dismissed in September 2004 and SLP was
filed in the Hon‟ble Supreme Court in October 2004. In
July 2005, the Hon‟ble Supreme Court ordered that if the
amount directed to be deposited by the Tribunal is
deposited, the appeals before the Tribunal has to be
restored and decided on merits. In these circumstances,
the amount deposited by the appellant is to be treated as
pre-deposit since the matter had not attained finality
during the relevant period. Therefore, refund is to be
treated as refund of pre-deposit made when the appeal
was pending. There is no dispute that the amounts
deposited is duty but this is not the issue which has been
taken into account while precedent decisions have
allowed the interest at 12% on the refunds claimed in
respect of pre deposit. I find that in the decisions cited by
the learned advocate, interest at 12% has been allowed.
Therefore, following the judicial discipline, I consider it
appropriate that interest in this case also is to be allowed
@ 12%. Accordingly, original adjudicating authority is
directed to workout the differential interest amount and
make the payment to the appellants.‖
21. As the provisions of section 243 Income Tax Act,
1961 and section 35FF of Central Excise Act, 1944, are
parimateria. Therefore, following the decision of Hon‟ble
Apex Court in the case of Sandvik Asia Ltd. (supra) and
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Sony Pictures Networks India Pvt.Ltd. (supra) I hold that
the appellants are entitled to claim interest from the date
of payment of initial amount till the date its refund @
12% per annum.‖
7. As this Tribunal has examined the issue in details in
the case of M/s Marshall Foundry & Engg. Pvt. Ltd.
(supra), therefore, I hold that the appellant is entitled to
claim the interest on delay refund from the date of
deposit till its realization.‖
4.4 Further decisions in following decisions have been brought
to my knowledge where in following has been observed:
A. Parle Agro Pvt Ltd. [2022 (380) ELT 219 (T-
ALL)]
"28. Section 11B of the Excise Act deals with claim for
refund of duty and interest, if any, paid on such duty. It
provides that any person claiming refund of any duty of
excise and interest may make an application for such
refund of duty and interest.
29. Section 11BB provides for interest on delayed
refund. It states that if any duty ordered to be refunded
under sub-section (2) of Section 11B is not refunded
within three months from the date of receipt of the
application, then the applicant shall be entitled to interest
after the expiry of three months from the date of receipt
of the application at such rate not below 5% and not
exceeding 30% as may be notified by the Central
Government in the Official Gazette.
30. In the present case, the provisions of Section 11B of
the Excise Act would not be applicable. This is for the
reason that the appellant was not claiming refund of duty.
The applicant, as noticed above, had claimed refund of
the revenue deposit. Such a finding has also been clearly
Customs Appeal No.70712 of 2021
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recorded by the Tribunal in the order dated 31-1-2017,
which order has attained finality.
33. There is no provision in the Excise Act, which deals
with refund of revenue deposit and so rate of interest has
not been prescribed, when revenue deposit is required to
be refunded.
34. To be able to have some guidance regarding the
rate of interest in case revenue deposit has to be
refunded, the aid of the interest provisions under Section
11AA (which deals with interest on delayed payment of
duty), Section 11BB (which deals with interest on delayed
refunds under Section 11B(2) and Section 11DD (which
deals with interest on the amount collected in excess of
the duty) can be taken.
35. The Notification issued under Section 11AA of the
Excise Act provides interest at the rate of fifteen per cent
per annum. The notification is reproduced below :
Notification No. 15/2016-C.E. (N.T.), dated 1-3-
2016
Notification Under Section 11AA
Rate of interest on delayed payment of duty (w.e.f.
1-4-2016). - In exercise of the powers conferred by
section 11AA of the Central Excise Act, 1944 (1 of 1944)
and in supersession of the notification of the Government
of India in the Ministry of Finance (Department of
Revenue) No. 5/2011-Central Excise (N.T.), dated the 1st
March, 2011 published in the Gazette of India,
Extraordinary, Part II, Section 3, sub-section (i), vide,
number GSR 136(E), dated the 1st March, 2011, except
as respects things done or omitted to be done before such
supersession, the Central Government hereby fixes the
rate of interest at fifteen per cent per annum for the
purpose of the said section.
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2. This notification shall come into force from the 1st
day of April, 2016.
36. The Notification issued under Section 11BB provides
interest at the rate of six per cent per annum. It is
reproduced below :
Notification No. 67/2003-C.E. (N.T.), dated 12-9-
2003
Notification Under Section 11BB
Interest @ 6% per annum on delayed refunds. - In
exercise of the powers conferred by section 11BB of the
Central Excise Act, 1944 (1 of 1944) and in supersession
of the notification of the Government of India in the
Ministry of Finance (Department of Revenue) No.
17/2002-Central Excise (N.T.), dated the 13th May, 2002
[GSR 353(E), dated the 13th May, 2002], except as
respect things done or omitted to be done before such
supersession, the Central Government hereby fixes the
rate of interest at six per cent per annum for the purpose
of the said section.
37. The Notification issued under Section 11DD provides
interest @ of 15% per annum on the amount collected in
excess of duty. It is reproduced below :
M.F. (D.R.) Notification No. 68/2003-C.E. (N.T.),
dated 12-9-2003
Notification Under Section 11DD
Interest @ 15% per annum on amounts collected in
excess of duty. - In exercise of the powers conferred by
section 11DD of the Central Excise Act, 1944 (1 of 1944)
the Central Government hereby fixes the rate of interest
at Fifteen per cent per annum for the purpose of the said
section.
38. It would also be to pertain to refer to the
Notification issued under Section 11AB of the Excise Act,
as it existed prior to 8-4-2011. It provides interest @
Customs Appeal No.70712 of 2021
19
18% per annum. The said Notification is reproduced
below :
"Notification No. 6/2011-C.E. (N.T.), dated 1-3-
2011
Notification Under Section 11AB
Rate of interest on delayed payment of duty. - In
exercise of the powers conferred by section 11AB of the
Central Excise Act, 1944 (1 of 1944) and in supersession
of the notification of the Government of India in the
Ministry of Finance (Department of Revenue) No.
66/2003-Central Excise (N.T.), dated the 12th
September, 2003 [GSR (E), dated the 12th September,
2003], except as respects things done or omitted to be
done before such supersession, the Central Government
hereby fixes the rate of interest at eighteen per cent per
annum for the purpose of the said section.
This notification shall come into force from the 1st day of
April, 2011.‖
39. In this connection reference can also made to the
decisions of the Allahabad High Court in Pace Marketing
Specialities and Ebiz.Com Private Limited, wherein after
making reference to the decision of the Supreme Court in
Sandvik Asia Ltd., the High Court granted interest at the
rate of 12% per annum in matters relating to refund of
amount deposited during investigation and adjudication.
40. In Riba Textiles, the Tribunal also granted interest
at the rate of 12% on refund of amount deposited during
investigation and at the time of entertaining the stay
application.
41. In view for the aforesaid decisions, and the fact that
the rate of interest varies from 6% to 18% in the
aforesaid Notifications issued under Sections 11AA, 11BB,
11DD and 11AB of the Excise Act, the grant of interest @
12% per annum seems to be appropriate.‖
B. Continental Engines Pvt Ltd. [2022 (382) ELT
522 (T-Del)]
Customs Appeal No.70712 of 2021
20
―7. A perusal makes it clear that the amount of pre-
deposit is to be refunded along with the interest which
was not below 5% and shall not exceed 36%. No concept
of any time-limit is being mentioned in the said provision.
Hon'ble Apex Court also has settled this issue in the case
of Sandvik Asia Ltd. reported as 2006 (196) E.L.T. 257
(S.C.) holding the assessee entitled for interest along with
the refund of the amount which he was not liable to pay
to the Department.
8. I also endorse the following findings of the Tribunal in
the case of M/s. Parle Agro Pvt. Ltd. reported as 2021-
TIOL-306-CESTAT-ALL = 2022 (380) E.L.T. 219 (Tri. -
All.) as under :
―30. .....
31. Section 11D of the Excise Act deals with duties of
excise collected from the buyer to be deposited with
Central Government. It provides that every person who is
liable to pay duty and has collected any amount in excess
of the duty assessed from the buyer of such goods in any
manner as representing duty of excise, shall forthwith pay
the amount so collected to the credit of the Central
Government.
32. Section 11DD of the Excise Act deals with interest on
the amount collected in excess of the duty. It provides
that where an amount has been collected in excess of the
duty from the buyer of such goods, the person who is
liable to pay such amount shall, in addition to the
amount, be liable to pay interest at such rate not below
ten per cent., and not exceeding thirty-six per cent per
annum, as is for the time being fixed by the Central
Government, by notification in the Official Gazette.
33. .......‖
Customs Appeal No.70712 of 2021
21
9. In view of the entire above discussion, I hold that the
appellant was entitled for the disbursement of entire
amount of Rs. 60 lakh being the amount of pre-deposit.
The adjustment of Rs. 38,79,769/- was absolutely
unreasonable and unjustified for being not pertaining to
the impugned issue. Appellant is simultaneously entitled
for the interest to be calculated at the rate of 12% from
the date of payment of the said amount to be calculated
in accordance with the table showing date of deposit as
mentioned above.‖
4.4 I find that all the above decisions are based on the
decision of teh Hon'ble Supreme Court in the case of
Sandvik Asia. Interpreting the above decision of Hon'ble
Supreme various benches of tribunal have concluded in the
favour of the grant of interest form the date of deposit and
at the rate of 12% (though not provided by the statute or
any Notification issued in terms of Section 11BB or Section
35FF of the Central Excise Act, 1944). The decision in case
of Sandvik Asia has been considered by the Hon'ble
Supreme Court in the case of Willowood Chemicals Pvt. Ltd.
[2022 (60) G.S.T.L. 3 (S.C.)] and following has been
observed:
―3.1 Details of 15 (Fifteen) refunds made to said writ
petitioner showed that there was delay ranging from 94 to
290 days.
3.2 In the circumstances it was prayed inter alia :-
―(a) to issue writ of mandamus and/or any other appropriate
writ(s) for directions is the Respondents for providing
appropriate compensation as well as interest, for delay in the
granting of refund;‖
4. The first case arises out of Special Civil Application No.
18591 of 2018 filed by M/s. Willowood Chemicals Pvt. Ltd.
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submitting that said Writ Petitioner was entitled on the basis
of Section 16 of the IGST Act read with Section 54 of the
CGST Act for compensation in receipt of delayed payment as
detailed in Annexure D of the petition, which in turn dealt
with 12 refunds with delay ranging between 94 to 290 days.
The special civil application had thus prayed for appropriate
compensation.
5. In both the petitions it was submitted that inaction
leading to inordinate delay in granting refunds was per se
arbitrary and that the inordinate delay impacted the working
capacity of the Writ Petitioners thereby reducing their ability
to conduct business and as such appropriate compensation
ought to be awarded along with interest for delay.
The submissions were opposed by the Learned Counsel
appearing for the Revenue.
6. The High Court considered the rival submissions in light of
the statutory provisions and relied upon certain decisions
including the decision of this Court in K.T. Plantation Pvt. Ltd.
and Anr. v. State of Karnataka [(2011) 9 SCC 1], Sandvik
Asia Ltd. v. Commissioner of Income Tax-I, Pune and Others
[(2006) 2 SCC 508 = 2007 (8) S.T.R. 193 (S.C.) = 2006
(196) E.L.T. 257 (S.C.)] and Commissioner of Income Tax,
Gujarat v. Gujarat Fluoro Chemicals [(2014) 1 SCC 126 =
2017 (51) S.T.R. 236 (S.C.) = 2013 (296) E.L.T. 433 (S.C.)].
In its judgment dated 10-7-2019 which is under challenge in
the second case, the High Court concluded :
―22. The position of law appears to be well settled. The
provisions relating to an interest of delated payment of refund
have been consistently held as beneficial and non-
discriminatory. It is true that in the taxing statute the
principles of equity may have little role to play, but at the
same time, any statute in taxation matter should also meet
with the test of constitutional provision.
Customs Appeal No.70712 of 2021
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23. The respondents have not explained in any manner the
issue of delay as raised by the writ applicants by filing any
reply.
24. The chart indicating the delay referred to above speaks
for itself.
25. In the overall view of the matter, we are inclined to hold
the respondents liable to pay simple interest on the delayed
payment at the rate of 9% per annum. The authority
concerned shall look into the chart provided by the writ-
applicants, which is at Page-30, Annexure-D to the writ
application and calculate the aggregate amount of refund. On
the aggregate amount of refund, the writ-applicants are
entitled to 9% per annum interest from the date of filing of
the GSTR-03. The respondents shall undertake this exercise
at the earliest and calculate the requisite amount toward the
interest. Let this exercise be undertaken and completed
within a period of two months from the date of receipt of the
writ of this order. The requisite amount towards the interest
shall be paid to the writ-applicants within a period of two
months form the date of receipt of the writ of this order.‖
7. The first case was then disposed of on the same day with
the following observations :-
―4. For the reasons assigned in the Special Civil Application
No. 15925 of 2018, decided on 10-7-2019, this writ
application is allowed to the extent that the writ applicants
are entitled to the interest for the delayed payment at the
rate of 9% per annum.
The authority concerned shall look into the chart provided by
the writ applicants, which is at Page 30, Annexure D to the
writ application and calculate the aggregate refund, the writ
applicants are entitled to 9% per annum interest from the
date of filing of the GSTR-38. The respondents shall
undertake this exercise at the earliest and calculate the
Customs Appeal No.70712 of 2021
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requisite amount towards interest. Let this exercise be
undertaken and completed within a period of two months
from the date of receipt of the writ of this order. The requisite
amount towards the interest shall be paid to the writ
applicants within a period of two months from the date of
receipt of the writ of this order.‖
8. The appellant being aggrieved, preferred Review Petitions
in both the cases. It was submitted inter alia :
―4. It is respectfully submitted that this Hon'ble Court has
directed the respondent authority to pay simple interest on
the delayed payment at the rate of 9% per annum from the
date of filing of the GSTR-3B.
5. It is respectfully submitted that as per section 56 of the
IGST Net Interest at the rate of not exceeding six percent
may be given whereas by order dated 10-7-2011 this Hon'ble
Court was pleased to give interest at the rate of 9%.‖
By separate orders dated 13-3-2020 passed in both the
cases, the Review Petitions preferred by the appellant were
dismissed.
9. The aforestated judgments and orders passed by the High
Court are under challenge in these appeals. The appellants do
not dispute the eligibility of the respondents for receiving
interest for delayed payment of claims but their submission is
that in terms of the relevant statutory provision, the interest
could be awarded at the rate of 6 per cent and not 9 per cent
per annum. Considering the stand taken by the appellants, at
the interim stage, this Court directed the appellants to make
good payment of interest at the rate of 6 per cent.
Accordingly, the amounts representing interest at that rate
have since then been made over.
13. The instant cases have not arisen from any order passed
by an Adjudicating Authority or Appellate Authority or
Appellate Tribunal or Court and the cases are strictly within
Customs Appeal No.70712 of 2021
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the scope of the principal provision of Section 56 and not
under the proviso thereof. In light of these provisions, the
question which arises for consideration is whether the High
Court was justified in awarding interest at the rate of 9 per
cent per annum.
14. Before we deal with the question, it must be stated that
initially a bench of two Judges of this Court in Union of India
and Others v. Orient Enterprises and Another [(1998) 3 SCC
501 = 1998 (99) E.L.T. 193 (S.C.)] had observed that a Writ
Petition under Article 226 of the Constitution filed solely for
relief for payment of interest on delayed refund would not be
maintainable. For facility, the relevant portion from the said
decision is quoted here :
―6. In Suganmal [AIR 1965 SC 1740 : 56 ITR 84 : 16 STC
398] this Court has laid down that a writ petition under Article
226 of the Constitution solely praying for the issue of a writ of
mandamus directing the State to refund the money is not
ordinarily maintainable for the simple reason that a claim for
such a refund can always be made in a suit against the
authority which had illegally collected the money as a tax.
This Court has made a distinction between a direction for
refund given by way of consequential order in a case where
the legality of the assessment is questioned and a case where
the petition is only for the purpose of seeking refund. It has
been observed :
―We do not consider it proper to extend the principle
justifying the consequential order directing the refund of
amount illegally realised, when the order under which the
amounts had been collected has been set aside, to cases in
which only orders for the refund of money are sought. The
parties had the right to question the illegal assessment orders
on the ground of their illegality or unconstitutionality and,
therefore, could take action under Article 226 for the
protection of their fundamental right, and the courts, on
Customs Appeal No.70712 of 2021
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setting aside the assessment orders, exercised their
jurisdiction in proper circumstances to order the
consequential relief for the refund of the tax illegally realised.
We do not find any good reason to extend this principle and,
therefore, hold that no petition for the issue of a writ of
mandamus will be normally entertained for the purpose of
merely ordering a refund of money to the return of which the
petitioner claims a right.‖
7. The Court has emphasised that there was no legal right in
the appellant who had filed the writ petition to claim the
refund under the relevant statute.
8. In the present case also till the insertion of Section 27A in
the Act by Act 22 of 1995 there was no right entitling
payment of interest on delayed refund under the Act. Such a
right was conferred for the first time by the said provision.
Act 22 of 1995 also inserted Section 28AA which provides for
payment of interest on delayed payment of duty by a person
who is liable to pay the duty. Thus at the relevant time there
was no statutory right entitling the respondents to payment
of interest on delayed refund and the writ petition filed by
them was not for the enforcement of a legal right available to
them under any statute. The claim for interest was in the
nature of compensation for wrongful retention by the
appellants of money that was collected from the respondents
by way of customs duty, redemption fine and penalty. In view
of the law laid down by this Court in Suganmal [AIR 1965 SC
1740: 56 ITR 84: 16 STC 398] a writ petition seeking the
relief of payment of interest on delayed refund of the amount
so collected could not, in our opinion, be maintained. The
decisions on which reliance has been placed by Shri Rawal
were cases where the legality of the orders requiring payment
of tax or duty were challenged and the High Court in exercise
of its jurisdiction under Article 226 of the Constitution, while
setting aside the said orders, has directed the refund of the
amount so collected with interest. The direction for payment
Customs Appeal No.70712 of 2021
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of interest in these cases was by way of consequential relief
along with the main relief of setting aside the order imposing
the tax or duty. Those cases stand on a different footing and
have no application to the present case. The appeal is,
therefore, allowed, the impugned judgment of the High Court
is set aside and the writ petition filed by the respondents
before the High Court is dismissed. No order as to costs.‖
15. However, subsequently another Bench of two Judges of
this Court in Godavari Sugar Mills Ltd. in more or less
identical circumstances settled the issue and found the Writ
Petition to be maintainable. The observations of this Court
were :
―7. The High Court relying upon the decision of this Court
in Suganmal v. State of M.P. [AIR 1965 SC 1740] has held
that the prayer in the writ petition being one for payment
of interest, it should be considered to be a writ petition
filed to enforce a money claim and therefore, not
maintainable. The observations in Suganmal [AIR 1965 SC
1740] related to a claim for refund of tax and have to be
understood with reference to the nature of the claim made
therein. The decision in Suganmal [AIR 1965 SC 1740] has
been explained and distinguished in several subsequent
cases, including in U.P. Pollution Control Board v. Kanoria
Industrial Ltd. [(2001) 2 SCC 549] and ABL International
Ltd. v. Export Credit Guarantee Corpn. of India Ltd.
[(2004) 3 SCC 553] The legal position becomes clear when
the decision in Suganmal [AIR 1965 SC 1740] is read with
the other decisions of this Court on the issue, referred to
below :
(i) Normally, a petition under Article 226 of the
Constitution of India will not be entertained to enforce a
civil liability arising out of a breach of a contract or a tort to
pay an amount of money due to the claimants. The
aggrieved party will have to agitate the question in a civil
Customs Appeal No.70712 of 2021
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suit. But an order for payment of money may be made in a
writ proceeding, in enforcement of statutory functions of
the State or its officers. (Vide Burmah Construction Co. v.
State of Orissa [AIR 1962 SC 1320 : 1962 Supp (1) SCR
242]).
(ii) If a right has been infringed - whether a fundamental
right or a statutory right - and the aggrieved party comes
to the Court for enforcement of the right, it will not be
giving complete relief if the Court merely declares the
existence of such right or the fact that existing right has
been infringed. The High Court, while enforcing
fundamental or statutory rights, has the power to give
consequential relief by ordering payment of money realised
by the Government without the authority of law. (Vide
State of M.P. v. Bhailal Bhai [AIR 1964 SC 1006]).
(iii) A petition for issue of writ of mandamus will not
normally be entertained for the purpose of merely ordering
a refund of money, to the return of which the petitioner
claims a right. The aggrieved party seeking refund has to
approach the civil court for claiming the amount, though
the High Courts have the power to pass appropriate orders
in the exercise of the power conferred under Article 226 for
payment of money. (Vide Suganmal v. State of M.P. [AIR
1965 SC 1740])
(iv) There is a distinction between cases where a claimant
approaches the High Court seeking the relief of obtaining
only refund and those where refund is sought as a
consequential relief after striking down the order of
assessment, etc. While a petition praying for mere issue of
a writ of mandamus to the State to refund the money
alleged to have been illegally collected is not ordinarily
maintainable, if the allegation is that the assessment was
without a jurisdiction and the taxes collected was without
authority of law and therefore the respondents had no
Customs Appeal No.70712 of 2021
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authority to retain the money collected without any
authority of law, the High Court has the power to direct
refund in a writ petition. (Vide Salonah Tea Co. Ltd. v.
Supdt. of Taxes [(1988) 1 SCC 401 : 1988 SCC (Tax) 99
(2)]
(v) It is one thing to say that the High Court has no
power under Article 226 of the Constitution to issue a writ
of mandamus for making refund of the money illegally
collected. It is yet another thing to say that such power can
be exercised sparingly depending on facts and
circumstances of each case. For instance, where the facts
are not in dispute, where the collection of money was
without the authority of law and there was no case of
undue enrichment, there is no good reason to deny a relief
of refund to the citizens. But even in cases where collection
of cess, levy or tax is held to be unconstitutional or invalid,
refund is not an automatic consequence but may be refused
on several grounds depending on facts and circumstances
of a given case. (Vide U.P. Pollution Control Board v.
Kanoria Industrial Ltd. [(2001) 2 SCC 549])
(vi) Where the lis has a public law character, or involves a
question arising out of public law functions on the part of
the State or its authorities, access to justice by way of a
public law remedy under Article 226 of the Constitution will
not be denied. (Vide Sanjana M. Wig v. Hindustan
Petroleum Corporation Ltd. (2005) 8 SCC 242)
We are therefore of the view that reliance upon Suganmal
was misplaced to hold that the writ petition filed by the
appellant was not maintainable.‖
16. We, therefore, proceed to consider the merits. Turning
to the basic question it must be noted that in the following
cases, this Court dealt with the question as to payment of
interest on the amount due by way of refund :
Customs Appeal No.70712 of 2021
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(A) In Modi Industries Ltd. and Another v. Commissioner of
Income Tax and Another [(1995) 6 SCC 396] a Bench of
three Judges of this Court was called upon to consider the
effect of Section 214 of the Income-tax Act, 1961, and the
questions which arose were set out as under :
―We shall now indicate how the controversy relating to the
meaning of the expression ―regular assessment‖ arises: an
assessee pays advance tax according to his estimate of his
income during the financial year relevant to the particular
assessment year. He then files a return and an assessment
is made under Section 143. It is found that he has paid
more amount by way of advance tax than the amount of
tax assessed. He will be refunded the extra amount with
interest calculated from the first day of April of that
assessment year to the date of assessment. No difficulty
arises in such a case. The difficulty arises in the following
situation: indeed it is one of the many situations - not
satisfied with the order of assessment, the assessee files an
appeal. The appeal is allowed as a consequence of which,
the assessment order is revised. As a result of such revised
assessment made pursuant to the appellate order, the tax
refundable to the assessee becomes larger - say whereas,
according to the original assessment he was entitled to
refund of Rs. 10,000/-, he becomes entitled to a total
refund of Rs. 15,000/- as a result of revised assessment
made pursuant to the appellate order. The question is - on
what amount and upto which date is the interest payable?
On being elaborated, the question yields the following sub-
questions :
(a) is the interest payable only on Rs. 10,000/- and if so,
whether the interest is payable till the date of first/original
assessment or till the date of the revised assessment?
Customs Appeal No.70712 of 2021
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(b) is the interest payable on Rs. 15,000/- and if
payable, is it payable only till the date of first/original
assessment or till the date of the revised assessment?
After considering various decisions on the point, the
conclusion drawn by the Court was :
―The argument, which was upheld in some of the cases now
under appeal, is that it will be inequitable if the assessee
does not get interest on the amount of advance tax paid,
when the amount paid in advance is refunded pursuant to
an appellate order. This is not a question of equity. There is
no right to get interest on refund except as provided by the
statute. The interest on excess amount of advance tax
under Section 214 is not paid from the date of payment of
the tax. Nor is it paid till the date of refund. It is paid only
upto the date of the regular assessment. No interest is at
all paid on excess amount of tax collected by deduction at
source. Before introduction of Section 244(1A) the assessee
was not entitled to get any interest from the date of
payment of tax upto the date of the order as a result of
which excess realisation of tax became refundable. Interest
under Section 243 or Section 244 was payable only when
the refund was not made within the stipulated period upto
the date of refund. But, if the assessment order was
reduced in appeal, no interest was payable from the date of
payment of tax pursuant to the assessment order to the
date of the appellate order.
Therefore, interpretation of Section 214 or any other
section of the Act should not be made on the assumption
that interest has to be paid whenever an amount which has
been retained by the tax authority in exercise of statutory
power becomes refundable as a result of any subsequent
proceeding. (Emphasis supplied)
(B) In Godavari Sugar Mills Ltd., a Bench of two Judges of
this Court considered the question whether interest on the
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32
compensation amount at the rate of 9 per cent per annum
could be awarded when the terms of Section 6 of the
Maharashtra Agriculture Lands (Ceiling of Holdings) Act, 1961
prescribed payment of interest only at the rate of 3 per cent
per annum. The discussion on the point was :
―9. There is considerable force in the submissions of Ms.
Madhavi Divan, the Learned Counsel for the respondents
that the decisions of the Bombay High Court in
Krishnakumar [W.P. No. 83 of 1986, decided on 29-6-1991
(Bom.)] and Changdeo [ W.P. No. 3805 of 2000, decided on
7-7-2000 (Bom.)] are not sound, as they completely ignore
Section 26 of the Act, while awarding interest at 9% per
annum on the belated payment of compensation.
10. The question as to when and in what circumstances,
interest could be awarded on belated payment of
compensation, was considered by this Court in Union of
India v. Parmal Singh [(2009) 1 SCC 618]. This Court first
referred to the general principle and then the exceptions
thereto, as under : (SCC pp. 624-25, paras 12-13)
―12. When a property is acquired, and law provides for
payment of compensation to be determined in the manner
specified, ordinarily compensation shall have to be paid at
the time of taking possession in pursuance of acquisition.
By applying equitable principles, the courts have always
awarded interest on the delayed payment of compensation
in regard to acquisition of any property. ...
13. ... The said general principle will not apply in two
circumstances. One is where a statute specifies or
regulates the interest. In that event, interest will be
payable in terms of the provisions of the statute. The
second is where a statute or contract dealing with the
acquisition specifically bars or prohibits payment of
interest on the compensation amount. In that event,
interest will not be awarded. Where the statute is silent
Customs Appeal No.70712 of 2021
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about interest, and there is no express bar about payment
of interest, any delay in paying the compensation or
enhanced compensation for acquisition would require
award of interest at a reasonable rate on equitable
grounds.‖
This Court, dealing with an acquisition under the Defence
of India Act, 1962 (which did not contain any provision
either requiring or prohibiting payment of interest), upheld
the award of interest at 6% per annum.
11. Section 24 of the Act requires the Collector, after
possession of surplus land was taken over under Section
21(4) of the Act, to cause public notice requiring persons
interested to lodge their claims. Section 25 of the Act
provides for determination of compensation and
apportionment thereof. Section 26 deals with mode of
payment of amount of compensation and the same is
extracted below :
―26. Mode of payment of amount of compensation. - (1)
The amount of compensation may, subject to the
provisions of sub-section (3), be payable in transferable
bonds carrying interest at three per cent per annum.
(2) The bonds shall be -
(a) of the following denominations, namely - Rs. 50; Rs.
100; Rs. 200; Rs. 500; Rs. 1000; Rs. 5000 and Rs.
10,000; and
(b) of two classes - one being repayable during a period
of twenty years from the date of issue by equated annual
instalment of principal and interest, and the other being
redeemable at par at the end of a period of twenty years
from the date of issue. It shall be at the option of the
person receiving compensation to choose payment in one
or other class of bonds, or partly in one class and partly in
another.
Customs Appeal No.70712 of 2021
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(3) Where the amount of compensation or any part
thereof, cannot be paid in the aforesaid denomination, it
may be paid in cash.‖ (Emphasis supplied)
The said section contemplates the payment of
compensation with interest at 3% per annum in annual
instalments spread over a period of 20 years or at the end
of 20 years. It also contemplates payment being made
either by transferable bonds or in cash. Sub-section (3) of
Section 26 enabling payment of compensation by cash, in
cases where it could not be paid by such bonds, does not
disturb the rate of interest, which is 3% per annum for 20
years, provided in sub-section (1) thereof. We are
therefore of the view that whether the payment is made by
transferable bonds or by cash, the rate of interest can be
only at 3% per annum for a period of 20 years from the
date of taking possession.
12. The next question that requires consideration is about
the rate of interest if the payment is not made even after
20 years, and whether it should be only at the rate of 3%
per annum, even after 20 years. Section 26 is silent about
the rate of interest payable, if the compensation is not
paid within 20 years. We are therefore of the view that
Section 26 contemplates payment of the compensation
within 20 years from the date of taking possession with
interest at 3% per annum; and for the period beyond 20
years, the said provision regarding interest will cease to
apply and the general equitable principles relating to
interest will apply; and interest can be awarded at any
reasonable rate, in the discretion of the court. Interest at
the rate of 6% per annum, beyond 20 years would be
appropriate and payable on equitable principles.‖
(C) In Sandvik Asia Ltd., a Bench of two Judges of this
Court was called upon to consider whether the inordinate
delay of about 12 to 17 years in making a refund would
Customs Appeal No.70712 of 2021
35
entitle grant of interest. In the facts of that case, interest at
the rate of 9 per cent per annum from 31-3-1986 to 27-3-
1998 was granted. Even while doing so this Court observed :
―48. There cannot be any doubt that the award of
interest on the refunded amount is as per the statutory
provisions of law as it then stood and on the peculiar
facts and circumstances of each case. When a specific
provision has been made under the statute, such
provision has to govern the field. Therefore, the court
has to take all relevant factors into consideration while
awarding the rate of interest on the compensation.‖
(D) In Gujarat Fluoro Chemicals, the correctness
of the decision in Sandvik Asia Ltd. came up for
consideration before a Bench of three Judges of this
Court, and the matter was considered thus :
―3. In order to answer the aforesaid issue before us, we
have carefully gone through the judgment of this Court
in Sandvik case [Sandvik Asia Ltd. v. CIT, (2006) 2 SCC
508] and the order of reference. We have also
considered the submissions made by the parties to the
lis.
4. We would first throw light on the reasoning and the
decision of this Court on the core issue in Sandvik case
[Sandvik Asia Ltd. v. CIT, (2006) 2 SCC 508]. The only
issue formulated by this Court for its consideration and
decision was whether an assessee is entitled to be
compensated by the Income Tax Department for the
delay in paying interest on the refunded amount
admittedly due to the assessee. This Court in the facts of
the said case had noticed that there was delay of various
periods, ranging from 12 to 17 years, in such payment
by the Revenue. This Court had further referred to the
several decisions which were brought to its notice and
also referred to the relevant provisions of the Act which
Customs Appeal No.70712 of 2021
36
provide for refunds to be made by the Revenue when a
superior forum directs refund of certain amounts to an
assessee while disposing of an appeal, revision, etc.
Since there was an inordinate delay on the part of the
Revenue in refunding the amount due to the assessee
this Court had thought it fit that the assessee should be
properly and adequately compensated and therefore in
para 51 of the judgment, the Court while compensating
the assessee had directed the Revenue to pay a
compensation by way of interest for two periods,
namely, for Assessment Years 1977-1978, 1978-1979,
1981-1982, 1982-1983 in a sum of Rs. 40,84,906 and
interest @ 9% from 31-3-1986 to 27-3-1998 and in
default, to pay the penal interest @ 15% per annum for
the aforesaid period.
5. In our considered view, the aforesaid judgment has
been misquoted and misinterpreted by the assessees
and also by the Revenue. They are of the view that in
Sandvik case [Sandvik Asia Ltd. v. CIT, (2006) 2 SCC
508] this Court had directed the Revenue to pay interest
on the statutory interest in case of delay in the
payment. In other words, the interpretation placed is
that the Revenue is obliged to pay an interest on
interest in the event of its failure to refund the interest
payable within the statutory period.
6. As we have already noticed, in Sandvik case
[Sandvik Asia Ltd. v. CIT, (2006) 2 SCC 508] this Court
was considering the issue whether an assessee who is
made to wait for refund of interest for decades be
compensated for the great prejudice caused to it due to
the delay in its payment after the lapse of statutory
period. In the facts of that case, this Court had come to
the conclusion that there was an inordinate delay on the
part of the Revenue in refunding a certain amount which
included the statutory interest and therefore, directed
Customs Appeal No.70712 of 2021
37
the Revenue to pay compensation for the same, not an
interest on interest.‖
17. Since reliance was placed by the High Court on the
decision of the Constitution Bench of this Court in K.T.
Plantation Pvt. Ltd. and Anr., we must note that what
arose for consideration in that case, was the
constitutional validity of the Devika Rani Roerich Estate
(Acquisition & Transfer) Act, 1996, and Section 110 of
the Karnataka Lands Reforms Act, 1996 and certain
notifications issued by the State Government. The
questions which arose for consideration were set out in
paragraph 25 of the decision as under :-
―Whether the relevant provisions violated the basic
structure of the Constitution in so far as they conferred
power on the executive government for withdrawal of
exception without hearing and without reasons and
whether the provisions of the Acquisition Act were
protected by Article 31(A) of the Constitution and
whether they were violative of Article 300(A) of the
Constitution?‖
After dealing with these questions, the reference was
answered thus :
We, therefore, answer the reference as follows :
(a) Section 110 of the Land Reforms Act and the
Notification dated 8-3-1994 are valid, and there is no
excessive delegation of legislative power on the State
Government.
(b) Non-laying of the Notification dated 8-3-1994
under Section 140 of the Land Reforms Act before the
State Legislature is a curable defect and it will not affect
the validity of the notification or action taken
thereunder.
Customs Appeal No.70712 of 2021
38
(c) The Acquisition Act is protected by Article 31A of
the Constitution after having obtained the assent of the
President and hence immune from challenge under
Article 14 or 19 of the Constitution.
(d) There is no repugnancy between the provisions of
the Land Acquisition Act, 1894 and the Rocrich and
Devika Rani Rocrich Estate (Acquisition & Transfer) Act,
1996 (in short ―the Acquisition Act‖), and hence no
assent of the President is warranted under Article 254(2)
of the Constitution.
(e) Public purpose is a precondition for deprivation of
a person from his property under Article 300A and the
right to claim compensation is also inbuilt in that article
and when a person is deprived of his property the State
has to justify both the grounds which may depend on
scheme of the statute, legislative policy, object and
purpose of the legislature and other related factors.
(f) Statute, depriving a person of his property is,
therefore, amenable to judicial review on grounds
hereinbefore discussed.‖
The aforestated answers and especially one at serial (e)
show the context in which the issue of compensation
was considered by this Court, which is completely
distinct and different from the issue with which we are
presently concerned.
18. Coming back to the present cases, the relevant
provision has prescribed rate of interest at 6 per cent
where the case for refund is governed by the principal
provision of Section 56 of the CGST Act. As has been
clarified by this Court in Modi Industries Ltd. and
Godavari Sugar Mills Ltd. wherever a statute specifies or
regulates the interest, the interest will be payable in
terms of the provisions of the statute. Wherever a
Customs Appeal No.70712 of 2021
39
statute, on the other hand, is silent about the rate of
interest and there is no express bar for payment of
interest, any delay in paying the compensation or the
amounts due, would attract award of interest at a
reasonable rate on equitable grounds. It is precisely for
this reason that paragraph 9 of the decision in Godavari
Sugar Mills Ltd. accepted the submission made by the
Learned Counsel for the respondents and confined the
rate of interest to the prescription made in the statute.
The award of interest at a rate in excess of what was
prescribed by the statute was only for a period beyond
20 years where the matter was not strictly covered by
the statute and as such it would be in the realm of
discretion of the Court. It must also be noted here that
the inordinate delay of up to 17 years in making refunds
was a special circumstance when this Court was
persuaded to accept grant of interest at the rate of 9 per
cent per annum in Sandvik Asia Ltd. Even while doing
so, the observations made by this Court in
Paragraph 48 of the decision are quite clear that
"the award of interest in refund and amount must
be as per the statutory provisions of law and
whenever a specific provision has been made
under the statute such provision has to govern the
field." The subsequent decision of the Bench of three
Judges in Gujarat Fluoro Chemicals noticed that the
grant of interest at the rate of 9 per cent was in the
facts of the case in Sandvik Asia Ltd.
19. Since the delay in the instant case was in the
region of 94 to 290 days and not so inordinate as was
the case in Sandvik Asia Ltd., the matter has to be seen
purely in the light of the concerned statutory provisions.
In terms of the principal part of Section 56 of the CGST
Act, the interest would be awarded at the rate of 6 per
cent. The award of interest at 9 per cent would be
Customs Appeal No.70712 of 2021
40
attracted only if the matter was covered by the proviso
to the said Section 56. The High Court was in error in
awarding interest at the rate exceeding 6 per cent in the
instant matters.‖
4.5 In the present case impugned order clearly observes that
the amount that was deposited by the appellant at the time of
visit of officers to their premises was appropriated by the original
authority while adjudicating the case of shortages against the
appellant. The amount so appropriated acquired the character of
duty, the moment it is appropriated against the demand made.
In case of Mafatlal Industries [1997 (89) ELT 247 (SC)], Hon'ble
Supreme Court has observed as follows:
"68. Re. : (I) : Hereinbefore, we have referred to the
provisions relating to refund obtaining from time to time
under the Central Excises and Salt Act. Whether it is Rule
11 (as it stood from time to time) or Section 11B (as it
obtained before 1991 or subsequent thereto), they
invariably purported to be exhaustive on the question of
refund. Rule 11, as in force prior to August 6, 1977,
stated that ―no duties and charges which have been paid
or have been adjusted....shall be refunded unless the
claimant makes an application for such refund under his
signature and lodges it to the proper officers within three
months from the date of such payment or adjustment, as
the case may be‖. Rule 11, as in force between August 6,
1977 and November 17, 1980 contained sub-rule (4)
which expressly declared: ―(4) Save as otherwise
provided by or under this rule, no claim of refund of any
duty shall be entertained‖. Section 11B, as in force prior
to April, 1991 contained sub-section (4) in identical
words. It said : ―(4) Save as otherwise provided by or
under this Act, no claim for refund of any duty of excise
shall be entertained‖. Sub-section (5) was more specific
and emphatic. It said : ―Notwithstanding anything
contained in any other law, the provisions of this section
Customs Appeal No.70712 of 2021
41
shall also apply to a claim for refund of any amount
collected as duty of excise made on the ground that the
goods in respect of which such amount was collected
were not excisable or were entitled to exemption from
duty and no court shall have any jurisdiction in respect of
such claim.‖ It started with a non-obstante clause; it took
in every kind of refund and every claim for refund and it
expressly barred the jurisdiction of courts in respect of
such claim. Sub-section (3) of Section 11B, as it now
stands, is to the same effect - indeed, more
comprehensive and all-encompassing. It says, ―(3)
Notwithstanding anything to the contrary contained in any
judgment, decree, order or direction of the Appellate
Tribunal or any court or in any other provision of this Act
or the rules made thereunder or in any law for the time
being in force, no refund shall be made except as
provided in sub-section‖.
The language could not have been more specific and
emphatic. The exclusivity of the provision relating to
refund is not only express and unambiguous but is in
addition to the general bar arising from the fact that the
Act creates new rights and liabilities and also provides
forums and procedures for ascertaining and adjudicating
those rights and liabilities and all other incidental and
ancillary matters, as will be pointed out presently. This is
a bar upon a bar - an aspect emphasised in Para 14, and
has to be respected so long as it stands. The validity of
these provisions has never been seriously doubted. Even
though in certain writ petitions now before us, validity of
the 1991 (Amendment) Act including the amended
Section 11B is questioned, no specific reasons have been
assigned why a provision of the nature of sub-section (3)
of Section 11B (amended) is unconstitutional. Applying
the propositions enunciated by a seven-Judge Bench of
this Court in Kamala Mills, it must be held that Section
Customs Appeal No.70712 of 2021
42
11B [both before and after amendment] is valid and
constitutional. In Kamala Mills, this Court upheld the
constitutional validity of Section 20 of the Bombay Sales
Tax Act (set out hereinbefore) on the ground that the
Bombay Act contained adequate provisions for refund, for
appeal, revision, rectification of mistake and for
condonation of delay in filing appeal/revision. The Court
pointed out that had the Bombay Act not provided these
remedies and yet barred the resort to civil court, the
constitutionality of Section 20 may have been in serious
doubt, but since it does provide such remedies, its validity
was beyond challenge. To repeat - and it is necessary to
do so - so long as Section 11B is constitutionally valid, it
has to be followed and given effect to. We can see no
reason on which the constitutionality of the said provision
- or a similar provision - can be doubted. It must also be
remembered that Central Excises and Salt Act is a special
enactment creating new and special obligations and
rights, which at the same time prescribes the procedure
for levy, assessment, collection, refund and all other
incidental and ancillary provisions. As pointed out in the
Statement of Objects and Reasons appended to the Bill
which became the Act, the Act along with the Rules was
intended to ―form a complete central excise code‖. The
idea was ―to consolidate in a single enactment all the laws
relating to central duties of excise‖. The Act is a self-
contained enactment. It contains provisions for collecting
the taxes which are due according to law but have not
been collected and also for refunding the taxes which
have been collected contrary to law, viz., Sections 11A
and 11B and its allied provisions. Both provisions contain
a uniform rule of limitation, viz., six months, with an
exception in each case. Sections 11 and 11B are
complimentary to each other.
Customs Appeal No.70712 of 2021
43
NATURE AND CHARACTER OF REFUND CLAIMS UNDER
THE CENTRAL EXCISES AND SALT ACT AND THE
CUSTOMS ACT :
96. It would be evident from the above discussion that
the claims for refund under the said two enactments
constitute an independent regimen. Every decision
favourable to an assessee/manufacturer, whether on the
question of classification, valuation or any other issue,
does not automatically entail refund. Section 11B of the
Central Excises and Salt Act and Section 27 of the
Contract Act, whether before or after 1991 amendment -
as interpreted by us herein - make every refund claim
subject to proof of not passing-on the burden of duty to
others. Even if a suit is filed, the very same condition
operates. Similarly, the High Court while examining its
jurisdiction under Article 226 - and this Court while acting
under Article 32 - would insist upon the said condition
being satisfied before ordering refund. Unless the
claimant for refund establishes that he has not passed on
the burden of duty to another, he would not be entitled to
refund, whatever be the proceedings and whichever be
the forum. Section 11B/Section 27 are constitutionally
valid, as explained by us hereinbefore. They have to be
applied and followed implicitly wherever they are
applicable.
99. The discussion in the judgment yields the following
propositions. We may forewarn that these propositions
are set out merely for the sake of convenient reference
and are not supposed to be exhaustive. In case of any
doubt or ambiguity in these propositions, reference must
be had to the discussion and propositions in the body of
the judgment.
(i) Where a refund of tax/duty is claimed on the ground
that it has been collected from the petitioner/plaintiff -
Customs Appeal No.70712 of 2021
44
whether before the commencement of the Central Excises
and Customs Laws (Amendment) Act, 1991 or thereafter
- by mis-interpreting or mis-applying the provisions of the
Central Excises and Salt Act, 1944 read with Central
Excise Tariff Act, 1985 or Customs Act, 1962 read with
Customs Tariff Act or by mis-interpreting or mis-applying
any of the rules, regulations or notifications issued under
the said enactments, such a claim has necessarily to be
preferred under and in accordance with the provisions of
the respective enactment before the authorities specified
thereunder and within the period of limitation prescribed
therein. No suit is maintainable in that behalf. While the
jurisdiction of the High Courts under Article 226 - and of
this Court under Article 32 - cannot be circumscribed by
the provisions of the said enactments, they will certainly
have due regard to the legislative intent evidenced by the
provisions of the said Acts and would exercise their
jurisdiction consistent with the provisions of the Act. The
writ petition will be considered and disposed of in the light
of and in accordance with the provisions of Section 11B.
This is for the reason that the power under Article 226
has to be exercised to effectuate the rule of law and not
for abrogating it.
The said enactments including Section 11B of
Central Excises and Salt Act and Section 27 of the
Customs Act do constitute "law" within the
meaning of Article 265 of the Constitution of India
and hence, any tax collected, retained or not
refunded in accordance with the said provisions
must be held to be collected, retained or not
refunded, as the case may be, under the authority
of law. Both the enactments are self-contained
enactments providing for levy, assessment,
recovery and refund of duties, imposed thereunder .
Section 11B of the Central Excises and Salt Act and
Customs Appeal No.70712 of 2021
45
Section 27 of the Customs Act, both before and
after the 1991 (Amendment) Act are
constitutionally valid and have to be followed and
given effect to. Section 72 of the Contract Act has
no application to such a claim of refund and cannot
form a basis for maintaining a suit or a writ
petition. All refund claims except those mentioned
under Proposition (ii) below have to be and must be
filed and adjudicated under the provisions of the
Central Excises and Salt Act or the Customs Act, as
the case may be. It is necessary to emphasise in
this behalf that Act provides a complete mechanism
for correcting any errors whether of fact or law and
that not only an appeal is provided to a Tribunal -
which is not a departmental organ - but to this
Court, which is a civil court."
4.6 Even if the amount is considered to be refund of deposit
then also the same has to be refunded under section 11B as the
said section has provided for the refund of deposit lying in
account current. The said provision as enshrined in Section 11B
is reproduced below:
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, if any, paid on such duty may make an
application for refund of such duty and interest, if any,
paid on such duty to the Assistant Commissioner of
Central Excise or Deputy Commissioner of Central
Excise]] before the expiry of two years from the relevant
datein such form and manner as may be prescribed and
the application shall be accompanied by such
documentary or other evidence (including the documents
referred to in Section 12-A) as the applicant may furnish
to establish that the amount of duty of excise and
Customs Appeal No.70712 of 2021
46
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 ...
Provided further that the limitation of two years shall not
apply where any duty and interest, if any, paid on such
duty has been paid under protest.
(2) If, on receipt of any such application, the Assistant
Commissioner of Central Exciseor Deputy Commissioner
of Central Excise is satisfied that the whole or any part of
the duty of excise and interest, if any, paid on such duty
paid by 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 excisable goods exported
out of India or on excisable materials used in the
manufacture of goods which are exported out of India;
(b) unspent advance deposits lying in balance in
the applicant's account current maintained with the
Principal Commissioner of Central Excise or
Commissioner of Central Excise;
....
4.7 Further while defining the relevant date under Section 11B of the Central Excise Act, 1944 specifically Customs Appeal No.70712 of 2021 47 cases of refund which arise as result of decisions of appellate authority or court have been highlighted. The said provisions is reproduced below:
(B) ―relevant date‖ means,--
(ec) in case where the duty becomes refundable as a consequence of judgment, decree, order or direction of appellate authority, Appellate Tribunal or any court, the date of such judgment, decree, order or direction;‖ 4.8 Thus all the refunds which are filed under the Central Excise Act, 1944 in terms of the decision of hon'ble Supreme Court in case of Mafatalal Industries and the above provisions whether of the duty, interest or any deposit made are governed by the provision of Section 11B of the Act. The interest thus gets governed by the provisions of Section 11BB as has been held by Hon'ble Supreme Court in case of Ranbaxy, referred in the impugned order. There has been exception carved out only for determination of relevant date for determining the period for which interest is to be paid in respect of deposit made as per Section 35F for filing the appeal before an appellate authority. Section 35FF provides that interest would be paid from the date of deposit made under Section 35F.
4.9 Hon'ble Delhi High Court has in case of Goldy Engineering Works [Order dated 14.07.2023 in WP (C) 4332/2022] observed as follows:
―3. For the sake of brevity, the Court deems it apposite to notice the facts as they obtain in the writ petition filed by M/s Goldy Engineering Works vs. Commissioner of Central Excise & Anr.3 On 27 July 2006, a Show Cause Notice4 is stated to have been issued to the petitioner, its proprietor, one M/S Aay Kay Engineering Works and its proprietor, in respect of certain goods which had been seized. The aforesaid SCN was followed by another SCN Customs Appeal No.70712 of 2021 48 dated 29 January 2007 in terms of which the Department raised a demand for additional duty as well as proposing penal action again against the noticees for having violated the provisions of an exemption notification. The petitioner asserts that during the pendency of those proceedings, it was also forced to deposit an amount of Rs. 20,00,000. The SCNs were ultimately finalized in terms of the order in original dated 08 February 2008.
4. In terms of the aforesaid order, the Additional Commissioner confirmed the duty demand of Rs.
45,31,574 /- under Section 11A of the 1944 Act and held the petitioners liable to pay the same along with interest thereon in accordance with Section 11AB of the 1944 Act. Further directions were framed for confiscation of cash amounting to Rs. 44,96,000/- and the imposition of monetary penalties amounting to Rs. 45,31,574/-. The amount of Rs. 20,00,000/- which had been deposited by the petitioners during the pendency of the SCN proceedings was also appropriated against the demands which stood crystallized.
5. Aggrieved by the aforesaid order, the petitioner preferred an appeal. That appeal came to be allowed in toto by the Appellate Authority in terms of its judgment dated 31 December 2008. The Department is stated to have preferred an appeal against that decision before the Customs, Excise and Service Tax Appellate Tribunal5 which ultimately came to be dismissed on 27 September 2016. Admittedly, while an interim order operated on that appeal, the same came to be discharged once the appeal was dismissed by the CESTAT.
6. The petitioner thereafter and more particularly on 14 November 2016 filed a formal application for refund which had accrued in terms of the order passed by the Appellate Authority on 31 December 2008 and consequent to the Customs Appeal No.70712 of 2021 49 challenge thereto being negatived by the CESTAT in terms of its judgment of 27 September 2016.
21. For the purposes of evaluating the submissions aforenoted, it would be apposite to notice the statutory provisions which apply. The issue of refund and the interest payable in case of delay is governed by Sections 11B and 11BB. The said provisions are reproduced hereinbelow: -
―Section 11-B. Claim for refund of [duty and interest, if any, paid on such duty].-- ....
Section 11-BB. Interest on delayed refunds.-- ...
22. It would also be pertinent to notice Sections 35F and 35FF in order to highlight the distinction between the statutory scheme underlying refund of duty and the return of a pre-deposit made in connection with an appeal that may be preferred. Those two provisions are extracted hereinbelow: -
―Section 35-F. Deposit of certain percentage of duty demanded or penalty imposed before filing appeal.--The Tribunal or the Commissioner (Appeals), as the case may be, shall not entertain any appeal--
(i) under sub-section (1) of Section 35, unless the appellant has deposited seven and a half per cent of the duty, in case where duty or duty and penalty are in dispute, or penalty, where such penalty is in dispute, in pursuance of a decision or an order passed by an officer of Central Excise lower in rank than the [Principal Commissioner of Central Excise or Commissioner of Central Excise];
(ii) against the decision or order referred to in clause (a) of subsection (1) of Section 35-B, unless the appellant has deposited seven and a half per cent of the duty, in Customs Appeal No.70712 of 2021 50 case where duty or duty and penalty are in dispute, or penalty, where such penalty is in dispute, in pursuance of the decision or order appealed against;
(iii) against the decision or order referred to in clause (b) of subsection (1) of Section 35-B, unless the appellant has deposited ten per cent of the duty, in case where duty or duty and penalty are in dispute, or penalty, where such penalty is in dispute, in pursuance of the decision or order appealed against: Provided that the amount required to be deposited under this section shall not exceed Rupees Ten crores:
Provided further that the provisions of this section shall not apply to the stay applications and appeals pending before any appellate authority prior to the commencement of the Finance (No. 2) Act, 2014.
Explanation.--For the purposes of this section ―duty demanded‖ shall include,--
(i) amount determined under Section 11-D;
(ii) amount of erroneous CENVAT credit taken;
(iii) amount payable under Rule 6 of the CENVAT Credit Rules, 2001 or the CENVAT Credit Rules, 2002 or the CENVAT Credit Rules, 2004.]‖ ―Section 35-FF. Interest on delayed refund of amount deposited under Section 35-F.--Where an amount deposited by the appellant under Section 35-F is required to be refunded consequent upon the order of the appellate authority, there shall be paid to the appellant interest at such rate, not below five per cent and not exceeding thirty-six per cent per annum as is for the time being fixed by the Central Government, by notification in the Official Gazette, on such amount from the date of Customs Appeal No.70712 of 2021 51 payment of the amount till, the date of refund of such amount:
Provided that the amount deposited under Section 35-F, prior to the commencement of the Finance (No. 2) Act, 2014, shall continue to be governed by the provisions of Section 35-FF as it stood before the commencement of the said Act.‖
23. The Court, at the outset notes, that Section 11B(1) in clear and unambiguous terms contemplates the making of an application for refund being made by any person claiming refund of any duty of excise and interest paid on such duty. The claim of refund insofar as the petitioner is concerned arose in the backdrop of the order in original coming to be set aside in appeal. The petitioner appears to have made an application for refund ultimately and only after the departmental appeal before the CESTAT came to be dismissed.
24. We deem it apposite to observe that the mere pendency of an appeal or an order of stay that may operate thereon would not detract from the obligation of any person claiming a refund making an application as contemplated under Section 11B(1) within the period prescribed and computed with reference to the ―relevant date‖. We do so observe in light of the indubitable principle that an order of stay that may operate in an appeal does not efface the demand or the obligation of refund that may have sprung into existence. It merely places the enforcement of the order appealed against in abeyance. The order of stay would, in any case, be deemed to have never existed once the appeal comes to be dismissed.
25. We further note that the subject of interest on delayed refund which is governed by Section 11BB itself prescribes the starting point for payment of interest on Customs Appeal No.70712 of 2021 52 delayed refunds to be the date when an application under Section 11B(1) is received. On a conjoint reading of Sections 11B and 11BB of the 1944 Act, therefore, we come to the irresistible conclusion that interest on delayed refund is clearly dependent upon the making of a formal application as stipulated by Section 11B of the 1944 Act.
26. We also find merit in the contention canvassed by Ms. Narain who had submitted that a refund of duty and interest paid thereon is liable to be viewed as distinct from a pre-deposit that may be made in compliance with Section 35F of the 1944 Act. The Circular of the Board too strikes an identical position when it is stated that a deposit which is made in compliance with a statutory pre- condition for the preferment of an appeal cannot be viewed as ―duty‖. It is the aforesaid aspect which appears to have weighed with the Board in proceeding to formulate its directive for refunds being effected immediately upon an appeal coming to be decided in favour of the assessee and not being made dependent upon any application being made in respect thereof.
27. The aforesaid position stands further fortified when one reads Section 35FF of the 1944 Act. As would be evident from a reading of that provision, Section 35FF as distinct from Section 11B does not require the making of a formal application by the assessee. In fact and contrary to Section 11B, the said provision uses the expression ―....there shall be paid to the appellant interest.....‖. Thus, the language of Section 35FF is an embodiment of the manifest obligation of the respondents to refund the pre- deposit consequent to an order passed by the Appellate Authority notwithstanding an application having not been made by the depositor.
Customs Appeal No.70712 of 2021 53
28. The distinction between Sections 11B and 35FF is also evident when one bears in mind the language employed in the latter and which stipulates that interest would commence from the date when the amount deposited by the appellant under Section 35F is required to be refunded consequent to an order passed by the Appellate Authority. Section 35FF thus indicates that interest would commence from the date of the order of the Appellate Authority as distinct from the making of an application which is prescribed to be the starting point insofar as Section 11BB of the 1944 Act is concerned.
29. Regard must also be had to the fact that in the case of refund of duty, it is also incumbent upon the assessee to declare and establish that the burden of tax has not been passed on. Absent that declaration, any refund that may be made would itself amount to the assessee being unjustly enriched. The making of an application and a declaration to the aforesaid effect is thus not merely an empty formality. This too appears to reinforce the imperatives of an application being formally made before a claim for refund is considered.
30. That only leaves the Court to consider the decisions which were cited by Mr. Mishra for our consideration. However, before proceeding to do so, we deem it pertinent to enter the following prefatory observations. A levy of interest on refund must undoubtedly follow where it is found that the amount has been unjustifiably retained or remitted with undue delay. The respondents cannot be permitted to retain moneys which are otherwise not due or are otherwise liable to be returned. The solitary question which stands raised in these matters is the date from which that interest would flow. In Shri Jagdamba Polymers, the High Court on facts had found that the refund was inordinately delayed even though a claim for the same had been promptly lodged. This is clearly Customs Appeal No.70712 of 2021 54 evident from Para 7 of the report. The said decision is thus clearly not an authority for the proposition that a refund must automatically follow de hors the requirements of Sections 11B and 11BB.
31. In eBIZ, the Allahabad High Court was not dealing with a claim for refund of ―duty‖ but an amount deposited in the course of investigation. The High Court further went on to hold that even in the absence of a statutory provision if it be found that tax or duty had been wrongly collected, it would be liable to be refunded. There cannot be a dispute with regard to the aforenoted general proposition. What we seek to emphasize here is that in the present case, the issue of refund is duly regulated by two statutory provisions whose prescriptions would necessarily have to be adhered to. However, for reasons aforenoted we find ourselves unable to endorse the observation appearing in Para 34 of the report where a deposit of duty and a pre deposit were considered to be identical concepts. As was noted hereinbefore, a pre- deposit made as a condition of filing an appeal is in any case not considered to be ―duty‖ even by the respondents.
32. The decision of this Court in Team HR Services, had frowned upon the distinction sought to be advocated by the respondents there between a deposit made under protest and a pre-deposit made in connection with an appeal. As would be further evident from a reading of Paras 14 and 15 the counsel appearing for the respondents had also failed to draw the attention of the Court to any statutory provision which governed the issue of refund. The aforesaid decision is thus clearly distinguishable especially when undisputedly, in the present matters the issue of refund is governed by the provisions of Sections 11B and 11BB.‖ Customs Appeal No.70712 of 2021 55 4.7 In view of discussions as above I do not find any merits in the appeal.
5.1 Appeal is dismissed.
(Order pronounced in open court on-17 December, 2024) (SANJIV SRIVASTAVA) MEMBER (TECHNICAL) akp