Customs, Excise and Gold Tribunal - Mumbai
Commissioner Of C. Ex. vs Reliance Industries Ltd. on 4 December, 2002
Equivalent citations: 2003(152)ELT379(TRI-MUMBAI)
ORDER G.N. Srinivasan, Member (J)
1. This is an appeal filed by the Commissioner of Central Excise and Customs against the order passed by the Commissioner of Central Excise, Mumbai-VII, dated 26-6-2000 wherein he had allowed the appeal and granted interest on delayed refund of deposit in terms of Section 11BB of the Central Excise Act.
2. The facts of the case are on 4th December, 1992 a show cause notice was issued to the respondent to show cause why a duty amounting to Rs. 16,39,84,343/- should not be recovered from them for the period 5-6-1992 to 31-12-1992. The said demand was raised in respect of Partially Oriented Yarn (POY) which was cleared without payment of duty under Rule 57F(2) of the Central Excise Rules from its Patalganga unit to Naroda unit for texturising. By its order dated 28th August, 1996, the Commissioner of Central Excise by Order-in-Original No. 209/96 confirmed the said show cause notice and demanded the duty indicated above. Respondent filed an Appeal E/2093/R/96-Bom. in the Tribunal. On 10-10-1996 the Tribunal in its Order no. 3611/96/WRB directed the respondents to deposit the entire amount of Rs. 16,39,84,343/- within three months. The time was extended and by the order of the Tribunal of 10-1-1997 and 26-2-1997, the said amount was deposited by the respondent. On 3-6-1998 the Tribunal by its Order No. 1140/98/WRB set aside the said order of the Commissioner, dated 28-8-1996 and remanded the matter to the Commissioner of Central Excise. On 26-10-: 1998, the respondent filed an application before the Assistant Commissioner for refund of the said amount deposited. The show cause notice dated 7-7-1999 was issued by the Deputy Commissioner as to why the refund claim should not be rejected. The respondent filed its reply dated 27-9-1999 stating inter alia that it was only a deposit. They relied on the judgment of the Bombay High Court in the case of Suvidhe Ltd v. UOI -1996 (82) E.L.T. 177. They also referred to other case laws. The adjudicating authority by its order dated 21-9-1999 granted refund but denied the interest as it was not a duty. Against this an appeal was filed. The appellate authority by the impugned order after referring to Circular No. 12/93-CEX dated 20-3-1993 granted in terms of Section 11BB of the Central Excise Act. Hence the appeal by the department.
3. The learned DR appearing on behalf of the department states that after the judgment of the Bombay High Court in the case of Suvidhe Ltd v. UOI - 1996 (82) E.L.T. 177, it cannot be argued that the deposit made by the assessee for prosecuting the appeal, they would be entitled to claim interest on that as it was not duty. He specifically invited our attention to the finding given by the Hon'ble High Court of Bombay in the said case wherein it was held as follows :-
"In respect of a deposit made under Section 35F, provisions of Section 11B can never be applicable. A deposit under Section 35F is not a payment of Duty but only a pre-deposit for availing the right of appeal. Such amount is bound to be refunded when the appeal is allowed with consequential relief."
4. He heavily relies on this judgment. As far as the reliance by the appellate authority on the Allahabad High Court judgment in the case of Super Electronics - 1999 (113) E.L.T. 792 is concerned, he submits that the facts in that case are entirely different from the facts before the Tribunal in this case.
5. As against this learned Senior Counsel on behalf of the respondent states that the judgment of the Allahabad High Court in Super Electron ics (supra) will be squarely applicable. He states that when the order of re fund is made and if it is made beyond a reasonable time viz., as indicated in Section 11BB of the Act the assessee is entitled to the interest.
6. We have considered the rival submissions, When we go through the facts of the case, it is very clear that the said deposit of about Rs. 16 crores was made in pursuance of the order of the Tribunal made on 10-10-1996. Therefore when it was made, it was in compliance with the provisions of Section 35F i.e. duty. When that is the case it may not be right on the part of the department to argue otherwise. It is true that when the observations of the Bombay High Court in the said case are seen at a first blush, it seems to support the argument of the learned DR. But in our view when we go through the Allahabad High Court judgment, it may not be so. In the Allahabad High Court judgment at paragraph 3, the court held as follows :
"3. The case of the petitioner is that by the order of the Tribunal dated 28-8-1998 the petitioner succeeded in appeal and it became entitled to refund from authority concerned. However, since there was delayed payment of more than 3 months the petitioner was entitled to get interest on the amount of refund. The same was denied by the Tribunal vide order dated 28th August, 1998 by observing in para 11 of the order which reads as under :-
"As regards the claim for interest for delayed refunds under Section 11BB, we find that the said provisions applied to duty ordered to be refunded under Section 11B(2). In the instant case, there is no order passed by the Assistant Commissioner under Section 11B(2). The question of awarding any interest does not, therefore, arise."
7. In the instant case when the order dated 3-6-1998 was passed by the Tribunal, the party was entitled to get refund which by the Order-in-Original the adjudicating authority has given. When the adjudicating authority gave the same, it took beyond the period of three months as indicated in Section 11BB of the Central Excise Act. When that is the question namely when there is a delay in granting the refund, it has denied the assessee to usage of that money and therefore he is entitled to get interest over the duty amount. Just as if there is a delayed payment of the duty by the assessee, he has to pay interest for the same, the assessee is also entitled to interest amount if there is a delayed payment of refund of the duty paid. The amount deposited for prosecuting the appeal can only be either duty or the penalty in terms of Section 35F. The observations of the High Court in Suvidhe Ltd.'s case may only be treated as an obiter dictum as it appears full discussion on the extent content and ambit of Section 35F of the Act has not been made. We are therefore of the view that the appeal does not have any merit and hence we dismiss the same.
8. Appeal dismissed.
ORDER Gowri Shankar, Member (T)
9. The primary question to be considered is the nature of deposit made by any person who files an appeal. Section 35F of the Central Excise Act, and Section 129E of the Customs Act, 1962 statute incorporate the general procedure that before a person can resort to an appellate remedy, he must deposit the sums in respect of which the appeal is sought to be filed. Section 35F says specifically that, pending appeal, the person desirous of appealing a decision of the order shall deposit with the proper officer the duty and interest and penalty levied. The proviso to the section enables the appellate authority to dispense with such deposit subject to such conditions as may be imposed. It is in terms of this proviso the Commissioner (Appeals) or the Tribunal entertain application for waiver of deposit and lays order thereon. Any deposit that is ordered by the appellate authority has necessarily in terms of the Act to be either duty or penalty or interest. (It does happen that the Tribunal deals with applications for dispensing with fine for confiscation of goods, which has been provisionally released which is ordered in the adjudication. We need not for the purpose of this appeal go into the correctness or otherwise of that practice). Therefore in a case (as in the present) where the amount required to be deposited only duty, it is difficult to say that what was deposited was anything other than duty. The Tribunal had no authority to ask for deposit of anything else. In point of fact, the Tribunal has specifically directed deposit of the duty demanded.
10. It is necessary to take note at this point of a situation in which an appellant is required to deposit duty and penalty. Doubtless, it is a practice of the Commissioner (Appeals) and the Tribunal to order deposit of a composite sum, without specifying precisely how much of it represents, duty and how much penalty. Very strictly speaking, any stay order should specify what has been deposited whether duty or penalty or both, and which portion of the deposit related to which arose.
11. The conclusion that what is deposited in such a situation is duty or penalty can be reinforced by considering a number of situations which do often take place in reality. For the sake of simplicity, I will confine myself to duty. An assessee may, in accordance with the order of the adjudicating authority, deposit with the proper officer the duty demanded in that order. He may, at that point, be uncertain whether he intends to .appeal the order. Thereafter he may file an appeal. In this situation, it would not be correct to say that, pending an appeal, it is a deposit in compliance with the lawful order of the appropriate authority. The amount deposited in such a situation thus clearly be duty and be governed by the provisions of Section 11B from the Act. Solely because the amount is deposited subsequently to an order of the Tribunal/ the character of the deposit does not alter; it does not take on a different complexion merely because it was deposited at a point later in pursuance of an order of the appellate authority.
12. No doubt the judgment of the Bombay High Court in Suvidhe Ltd. does contain a sentence that an amount deposited under Section 35F is not a deposit. The relevant part of the judgment read as follows :-
"In our judgment, the claim raised by the Department in the show cause notice is thoroughly dishonest and baseless. In respect of a deposit made under Section 35F, provisions of Section 11B can never be applicable. A deposit under Section 35F is not a payment of Duty but only a pre-deposit for availing the right of appeal. Such amount is bound to be refunded when the appeal is allowed with consequential relief.
In respect of such a deposit the doctrine of unjust enrichment will be inapplicable. In the circumstances, the petition succeeds......."
13. The issue before the High Court was therefore the maintainability of the notice issued to the assessee proposing to apply the provisions relating to unjust enrichment contained in Sub-section (2) of Section 11B of the Act. That is what the High Court in fact was concerned with. The High Court appears to make to add (as in fact more than once) that the doctrine of unjust enrichment will not apply to such a situation. Although the High Court has spelt out the reason why doctrine of unjust enrichment will not apply that is because the duty that was deposited under Section 35F was deposited much after the goods in respect of which it was demanded had been cleared. The normal mechanism and one that is almost invariably followed for transferring incidence of duty is the same as the one by which the buyer obtained the sale price of the goods that he sells. The duty being the part of the contract, it is incidence that stands for by being included in the purchase. Therefore the burden which Sub-section 11B cast on the assessee showing that the incidence of duty not having been passed on, would be discharged in a situation where the duty under consideration itself is paid subsequently. (I hasten to add that it could be possible that the incidence of this duty has also been passed on as, for example, by way of debit). Counsel for the respondent also cited before us a decision by the Delhi Bench of the Tribunal in Bharat Heavy Electricals Ltd. v. CCE - 2002 (139) E.L.T. 591 (T) ordering interest on deposit in fact from the date of order of the appellate Tribunal allowing appeal of the assessee, although it must be admitted that this decision also did not consider the aspect relating to. The departmental representative draws our attention to an order of the Bombay bench in Sachin Textiles Pvt. Ltd v. CCE - 2001 (127) E.L.T. 108 (T). The bench in this decision referred for consideration by a Larger Bench, the question as to whether the Tribunal has inherent powers to order the department to pay interest of refund of deposit. I do not see how this helps the department's case. The question of invoking the inherent powers would only arise in a situation where the statute itself does not contain express provisions. This bench in the present case is concerned with interpretation of these express provisions of the statute. It is only a case where the statute does not contain the provisions relating to the issue that the inherent powers even need to be considered. I have already made clear that it is in terms of the statute that the deposit of ordered. That deposit was duty and nothing else and therefore the provisions of Section 11BB will apply.
14. I agree that the appeal ought to be dismissed.