Custom, Excise & Service Tax Tribunal
M/S International Industrial Gases ... vs Cce, Bhopal on 8 April, 2010
CUSTOMS EXCISE & SERVICE TAX APPELLATE TRIBUNAL, West Block No.2, R. K. Puram, New Delhi. Date of hearing/decision: 08.04.2010 For approval and signature: Honble Shri Justice R.M.S. Khandeparkar, President Honble Shri Rakesh Kumar, Member (Technical) 1. Whether Press Reporters may be allowed to see the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982. 2 Whether it should be released under Rule 27 of the CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not? 3 Whether Their Lordships wish to see the fair copy of the Order? 4 Whether Order is to be circulated to the Departmental authorities? Excise Appeal No. 1889 of 2009 [Arising out of Order-in-Appeal No. 169/BPL/2009 dated 30.3.2009 passed by the Commissioner (Appeals), Customs, Central Excise and Service Tax, Bhopal]. M/s International Industrial Gases Limited Appellant Vs. CCE, Bhopal Respondent
Appearance: Rep. by Shri Prabhat Kumar, Advocate for the appellants Rep. by Sh. Nitin Anand, DR for the respondent.
Coram: Honble Sh. Justice R.M.S. Khandeparkar, President Honble Sh. Rakesh Kumar, Member (Technical) Oral order No._____ Per: Shri Justice R.M.S. Khandeparkar:
Heard the learned Advocate for the appellants and learned DR for the respondent.
2. The present appeal arises from order dated 30.03.2009 passed by the Commissioner (Appeals), Bhopal. By the impugned order, the appeal filed by the appellants against the order of the adjudicating authority has been dismissed. By the order dated 31.10.2002, the adjudicating authority had sanctioned interest to the extent of Rs. 1,23,447/- as against the claim of amount of interest to the tune of Rs. 44,53.516/- of the appellants. Being aggrieved by the said order rejecting the major part of the claim of interest the appellants filed the said appeal before the Commissioner (Appeals) which came to be dismissed by the impugned order. Hence, the present appeal.
3. The appellants are engaged in manufacture of oxygen and dissolved acetylene gases classifiable under chapter heading 2804 40 00 and 2901 29 12 respectively of the First Schedule to the Central Excise Tariff Act, 1985. The appellants had applied for registration as small scale industries with DIC, Sidhi. The appellants request for claim of exemption from payment of duty under Notification No. 175/86-CE dated 01.03.1986 came to be rejected on account of the absence of registration with DIC, Sidhi as SSI unit. Consequently appellants were required to pay normal rate of duty on their final product, which the appellant did, under protest. The request for the SSI unit registration was not favourably answered for a long time by DIC, Sidhi. Therefore, the appellants approached the High Court of Madhya Pradesh. The High Court decided the matter in favour of the appellants and directed the Director of Industries to reconsider the matter and finalise the same by September 2005. On the basis of the said decision of the High Court, the SSI registration was granted to the appellants w.e.f. 12.05.1985. The said certificate of registration was issued to the appellants on 29.10.2005 with retrospective effect i.e. 12.05.1989. Consequent to the grant of said registration, the appellants became entitled for the benefit of SSI exemption in terms of Notification No. 175/86-CE dated 01.03.1986. However, during the pendency of the proceeding to obtain the SSI registration, the appellants had been paying the duty under protest. Since during the said period, the appellants had been paying the duty at the normal rate, consequent to the grant of said certificate, the appellants applied for refund of the duty paid under protest, alongwith interest thereon. The authorities below allowed the application to the extent of refund of the duty paid by the appellants. As regards the interest, the matter was adjudicated and though the total amount of interest claimed by the appellants was to the extent of Rs. 44,53,516/-, taking into consideration the provisions of Section 11BB of the Central Excise Act, 1944 and the materials placed on record in relation to the claim of interest by both the parties, the adjudicating authority sanctioned the interest amount to the tune of Rs. 1,23,447/-.
4. While assailing the impugned order, the learned Advocate for the appellants submitted that the respondent could not have denied the interest on the amount which was withheld by the respondent and which undisputedly belonged to the appellants. Since the appellants were entitled for the benefit of exemption, the amount paid by the appellants towards the duty liability was clearly unauthorized and, therefore, the respondent ought to have paid the interest thereon for having retained the said amount without authority of law. On account of retention of the said amount, the appellants was restrained from using their own money for the relevant period and, therefore, the respondent ought to have paid due compensation for the same to the appellants in the form of interest. He placed reliance in the decision in the matter of Binjrajka Steel Tubes Limited vs. CCE, Hyderabad-III reported in 2007 (218) ELT 563 (Tri. Bang.), Sandvik Asia Ltd., vs. Commissioner of Income Tax-I, Pune reported in 2006 (196) ELT 257 (S.C.), Sunder Steels Ltd., vs. CC&CE (A), Hyderabad reported in 2009 (16) STR 228 (Tri. Bang.), Collector of Customs (Preventive) vs. Kuljit Singh reported in 1993 (67) ELT 238 (Cal.), Assistant Commissioner of C.Ex. vs. Calcutta Chemical Company Ltd., reported in 1992 (62) ELT 511 (Cal.), Jyoti Limited, Baroda vs. Union of India and Another reported in 1979 (4) ELT (J.546) (Guj.) in support of his contention for justification for the grant of interest on the amount which was lying with the respondent.
5. Learned DR on the other hand submitted that the decisions which are sought to be relied upon on behalf of the appellants are either in relation to the provisions of law comprised under Income Tax Act or delivered in a totally different situation, and, therefore, cannot be of any help to the appellants to justify grant of interest in the matter in hand. Drawing our attention to the decision in the matter of Hari Khemu Gawali vs. The Deputy commissioner of Police, Bombay and Another reported in AIR 1956 SCR 559 and Sachidananda Banerjee, A.C.C. Calcutta vs. Sitaram Agarwala reported in 1999 (110) ELT 292 (S.C.), he submitted that such decisions cannot be of any help to the party to justify the claim of interest under the Excise Act. Further, placing reliance in the decision in the matter of Prestige Engineering (India) Pvt. Ltd., vs. Union of India reported in 1991 (51) ELT 255 (All.), G.H. Industries vs. Collector of Central Excise, Ahmedabad reported in 1997 (94) ELT 483 (Guj.), Midland Plastics Ltd., vs. Union of India reported in 2006 (205) ELT 12 (MP), CCE, Pune vs. Dai Ichi Karkaria Ltd., reported in 1999 (112) ELT 353 (S.C) and Sun Pharmaceuticals Industries Ltd., vs. CCE, Chennai reported in 2005 (185) ELT 253 (Tri. LB). Learned DR submitted that in the absence of statutory provision under the Excise Act, no fault can be found with the authorities below in rejecting the claim for interest for the period for which it has been rejected. Referring to the impugned order, the learned DR submitted that the grant of interest can be in terms of the statutory provision comprised under Section 11BB which is sole provision which authorizes the statutory authorities functioning under the statute to grant the interest and also specifies the extent to which the interest can be granted and in fact adhering to the mandate of the said provision, the authorities having granted the interest, no fault can be found with the impugned order.
6. It is undisputed fact that the appellants obtained the registration as SSI unit only on 29.10.2005. Undoubtedly, it was with the retrospective effect i.e. from 12.05.1989. It is also a matter of record that from 1989 onwards i.e. from the time the appellants had applied for exemption, the appellants had been paying the duty under protest as the appellants were not armed with any SSI registration so as to claim the exemption benefit under Notification No. 175/86-CE dated 01.03.1986. It was only pursuant to the registration being granted on 29.10.2005, to be effective retrospectively from 12.05.1989, that the appellants were able to claim exemption retrospectively. On the strength of such registration, the appellants applied for refund of the amount of duty which was already paid by the appellants under protest. Undisputedly, the duty amount which was paid and on which refund was claimed was allowed and the amount was refunded to the appellants. The dispute relates only to the interest part.
7. Section 11BB of the Central Excise Act, 1944 deals with the subject of interest on delayed refunds. It provides that if any duty under sub-section (2) of Section 11B to an application is not refunded within three months from the date of receipt of application under sub-section (1) of that section, there shall be paid to the applicant interest under at such rate, not below 5% and not exceeding 30% p.a. as is for the time being fixed by the Central Government, by Notification in the official gazette on such duty from the date immediately after the expiry of three months from the date of receipt of such application till the date of refund of such duty, provided that where any duty ordered to be refunded under sub-section (2) of section 11B in respect of an application under sub-section (1) of that section made before the date on which the Finance Bill, 1995 receives the assent of the President, is not refunded within three months from such date, there shall be paid to the appellant interest under the said section from the date immediately after three months from such date. Undisputedly, this is the only statutory provision in relation to payment of interest on delayed refund found in the said statute. There is no other provision on this subject. Being so, the powers of the statutory authorities under the said statute are clearly circumscribed by the said provisions of law. Such authorities while dealing with the issue relating to the grant of interest on delayed refund have to grant the same strictly in accordance with the provision of law comprised under Section 11BB. It is settled law that the statutory authorities functioning under a statute under which they are require to function cannot travel beyond the scope of powers and duties entrusted to them under such statute. This has been elaborately explained by the Allahabad High court as well as Gujarat High Court. In Prestige Engineering case the Allahabad High Court has ruled thus:-
9 The Act and the Rules made thereunder do not provide for payment of interest in case of refund of duty. We must presume that Parliament advisedly did not provide for the same, while enacting Section 11-B in 1978. The fact that Section 243 and 244 of the income-tax Act provide for payment of interest by the Government on tax refunded shows that where he Parliament wanted to provide for such interest, it did provide therefore expressly. The omission to provide for interest under this Act must, therefore, be held to be deliberate. This legislative intention, in our opinion, is equally relevant in examining whether interest should be awarded on general principles of equity- which more later. The authorities under the Act it goes without saying- have to operate within the four corners of the Act and the Rules made thereunder (Of course, if any other enactment or Rule is made applicable by the Act Rules- or if any other statutory provision applies proprio vigore to the proceedings under the Act, same have to be followed). Since the Act or the Rules do not provide for grant any interest, the authorities under the Act, including the CEGAT, have no power to award interest. This position was not initially contested before us, though at a later stage of arguments the Counsel for the petitioner urged that even the authorities under the Act must be held to possess the power to award such interest. We cannot, however, agree with this proposition. The authorities under the Act are not Civil courts, nor is the proceeding for refund before them a suit. They have no inherent power to award interest. They have to act within the four corners of the Act and the Rules, In the absence of any guidance in the Act or the Rules in that behalf, with respect to the period, rate and other matters, the matter cannot be left to the pleasure of the authorities. Accordingly, it must be held that the authorities under the Act have no power to award interest on any principle whatsoever. The question is whether this Court in a writ petition should award such interest, more so in the light of what we have called- the deliberate omission of Parliament to provide for such interest.
8. The Gujarat High court in G.H. Industries case had held thus:-
5 As for as the impugned order dated April 5, 1991 passed by the passed by the Assistant Collector of Central Excise produced at Annexure-B is concerned, it cannot be said that the order is in any way unlawful, unjust or arbitrary. Be it noted that the officers appointed under the Act and exercising powers under the Act are bound by the Act. They are creatures of the statute. They cannot go beyond the provisions of the statute. Learned Counsel for the petitioner has fairly conceded that the Act and the Rules framed thereunder did not make any provisions whatsoever for payment of interest in respect of alleged or proved unlawful recovery of amount of excise duty. The Act and the rules only provide in certain circumstances for refund of the amount of duty wrongly collected. The Act and the Rules did not provide for payment of interest on such wrongful collection of amount of tax. Therefore the order passed by the Assistant Collector of Central Excise cannot be said to be in any way unlawful.
13 If the legislature intended that on the amount of excise duty unauthorisedly collected by the Revenue interest should be paid, it would have made specific provision as it is made in the Income Tax Act, 1961. It may also be noted that the Central Excise and Salt Act, 1944 is a complete code. It provides for refund of the amount of duty of excise (see S.11B of the Act). Similarly, it also provides for recovery of the duty of excise in case the amount of duty is short-levied, short-paid, not levied, not paid or erroneously refunded. Be it noted that in case of recovery of duty short-levied, short paid, not levied, not paid or erroneously refunded, there is no provision for charging interest by the Revenue. Thus having regard to the entire provision of the Act and particularly the provisions of Section 40 of the Act it becomes clear that whenever the authority has exercised powers under the Act the claim of interest cannot be sustained even on the principle of justice, equity and good conscience or on any such other ground.
9. Bare perusal of the impugned order discloses that the authorities below after taking into consideration the statutory provisions comprised under the said Act and bearing in mind the parameters of jurisdiction of such authority in the matter of grant of interest, ordered the payment of interest to the extent it has been granted under the impugned orders. While arriving at the said decision the adjudicating authority after taking into consideration all the materials on record as well as various statutory provisions held thus:-
4.1 It has been observed that the claimant in their submission and calculation chart of interest claiming Rs. 44,53,516/- from the financial year 1990-1991.
4.7 The proposed Refund Claim for Rs. 36,57,912/- was not cleared in pre-audit vide letter C. No. III(20)Pre-audit/Refund/STN/42/08/8375 dated 16.9.2008 with following significant observation made by Assistant Commissioner (Audit), Central Excise, Bhopal.
(i) The original refund applications (5 numbers) are dated 21.11.2006 & 09.01.2007.
(ii) Section 11BB inserted in the Central Excise Act, 1944 with effect from 26.05.95 only & has no retrospective application. This section is applicable when there is a delay in payment of refund claim beyond the period prescribed therein i.e. 3 months from the date of receipt of the refund application.
(iii) The directions of Commissioner (Appeals) in para-10 of his order-in-appeal dated 31.03.2007 is for grant of interest under Section 11BB in respect of their original claim only.
(iv) Section 11BB has no application in this case. It has not been held to be so in the appellate order either as there is no clear dictum to pay interest to the party from the date of their payment of duty dating back from 1989.
(v) The facts and circumstances of the instant case are clearly distinguishable as well. In this case, the party availed modvat credit and chooses to pay duty of excise on their clearances owing to the fact that they were denied SSI status by concerned state Government authorities. They fought with the concerned authorities and won in the year 2005 only.
(vi) During the period they paid duty by availing modvat credit charging the same (as findings in para-10 (vi) of the OIO dated 31.03.2007) from their customers.
(vii) In view of the above, in his view the interest under section 11BB can not be granted in this case from 1989 on wards but would be limited for the period of delay caused i.e. from the date of filing of refund application.
4.8 In view of above observations the interest amount recalculated, which is as under:
[In rupee] Amount of claim Date of filing Date after 3 months Date and amount sanctioned Rate of interest No. of days Interest amount 383558 21.09.06 21.12.06 21.01.08 Rs.
1661301 6% 403 25409 390064 22.09.06 22.12.06 402 25776 343750 23.09.06 23.12.06 401 22659 498870 23.09.06 23.12.06 401 32884 224135 23.09.06 23.12.06 401 14774 1840377 121504 04.04.08 Rs.
179075 6% 66 1943 Total 123447
10. The above findings based on assessment of entire material on record clearly disclose not only consideration of the materials on record by the concerned authority but also proper application of mind to the facts of the case and the law applicable thereto.
11. Being so, in fact we do not find any justification as such for interference in the impugned orders.
12. The decision of the Tribunal in Brinjrajka Steel Tubes case was in relation to the collection amount which was ab initio illegal. In the case in hand, the collection of duty was not illegal or unauthorised. The appellants had paid the duty when the appellants were lawfully obliged to pay the same. It is only on account of grant of exemption pursuant to the grant of certificate dated 29.10.2005 that the appellants became entitled for such exemption retrospectively and that therefore, the refund was available to the appellants. Being so, the authorities below were justified in applying the law comprised under Section 11BB while dealing with issue relating to the interest on such amount. The decision of the Tribunal in Binjrajka Steel Tubes case is, therefore, of no help to the appellants.
13. The decision of the Supreme Court in Sandvik Asia case was on the subject of claim for interest on interest which was withheld for very long period about twenty years, and that too without any justification. Besides, that was a case under the Income Tax Act, as also that bare reading of the decision would disclose that the same was granted essentially in exercise of powers under Article 142 of the Constitution of India. This is apparent from the decision of the Apex Court.
14. The decision of the Tribunal in Toyota Kirloskar Auto case was also in a case where the interest was sought to be claimed in relation to the amount which was collected without authority of law. Obviously, therefore, the decision cannot apply to the facts of the case in hand.
15. The decision in Sunder Steels case was of a single Member of the Tribunal solely on the basis that the authority below had ignored the Supreme Court decision in Sandvik Asia case while dealing with the issue pertaining to the interest. With utmost respect, the order does not lay down any proposition of law as such. Since the authority below had failed to note of the decision of the Apex Court which had overruled the decision of High Court and that of Larger Bench, the learned single Member had thought it appropriate to interfere in the order passed by the Commissioner (Appeals). That is not the case in the matter in hand.
16. In Kuljit Singh case, the Honble single Member Calcutta High Court had decided the matter on the basis that the authorities cannot contend that no interest should be paid because such interest is not statutorily payable. The decision is contrary to the law laid down by the Division Benchs of the Allahabad High Court and that of the Gujarat High Court.
17. The decision of Calcutta High Court in Calcutta Chemical Company case was in relation to the interest claimed on the payment which was made under mistake. In other words, it was on the amount which was not lawfully due and payable to the authorities. Obviously, the ruling given in such facts and circumstances cannot be applied to the cases where the amount which was lawfully paid when there was statutory liability to pay the same. The decision, therefore, is clearly distinguishable.
18. In Jyoti Limited case, the Gujarat High Court was dealing with the matter where money was collected illegally, by the excise authorities. Obviously, decision cannot be applied to the facts of the case in the matter in hand.
19. Learned DR was justified in drawing our attention to the decision of the Madhya Pradesh High Court in Midland Plastics case wherein the High Court has held that while dealing with the issue relating to the interest the provision of Section 11B and 11BB of the said Act are to be applied. It was held as under:-
15. Section 11BB of the Central Excise Act, 1944 with regard to interest on delayed payment was inserted by Section 75 of the Finance Act of 1995 with effect from 26.5.1995 and, therefore, with effect from the date three months subsequent thereof petitioner claims interest on the basis of notification issued by the Central Govt. in accordance with the aforesaid provision. This benefit is being resisted by the respondents on the ground that in a claim for Modvat credit made under Rule 57H the provisions of Section 11B and Section 11BB of the Central Excise Act will not apply. The question is considered by the Gujarat High Court in the case of Indo-Nippon (supra). That was a case where the assessee had made a contention that provisions of Section 11B and Section 11BB are not attracted to Modvat credit whereas it was the case of the department that the said provisions are applicable even to Modvat credit. After considering the provisions of sub-section (2) of Section 11B in Paras 28 and 29 of he aforesaid judgment a Division Bench of he Gujarat high Court has held that the language of clause C to the provisions of sub-section (2) is very clear and it has been held that the claim for refund based on Modvat credit is maintainable in accordance with the procedure and limitation prescribed in sub-section (1) of Section 11B of the Central Excise Act. This judgement of the Division Bench of the Gujarat High Court has been upheld by the Supreme Court and the S.L.P. filed by the department being S.L.P. (Civil) No. 658/02 has been dismissed by the Supreme Court on 26.8.2002. From a complete reading of the aforesaid judgment it is clear that it is held in the aforesaid judgment that the provisions of Rule 57H and the notification issued thereunder enable refund under the Modvat credit scheme but even in such cases the procedure and limitation for claiming such refund would be governed by the provisions of Section 11B of the Central Excise Act. That being so, the arguments advanced on behalf of the department to be contrary has to be rejected and it has to be held that with effect from the date the provisions of Section 11BB came into force petitioner was entitled to interest on the amount due in accordance with the notification issued by the department. Accordingly, with effect from 26.8.1995 till the date of settlement of the claim i.e. 28.6.2002 petitioner was entitled to interest at the rate notified by the Central Govt. in accordance wit the provisions of Section 11BB of the Central Excise Act. To that extent relief claimed for by the petitioner has to be allowed.
20. The learned DR is also justified in drawing attention to the ruling of the Apex Court in Dai Ichi Karkaria case whereby it was observed that the judgement relating to the Income Tax or other statutes have no relevance while considering a provision in an excise statute. Even though we are not concerned in the matter in hand regarding the interpretation of any statutory provision in Excise Act as such, to ascertain the scope of powers of the statutory authorities functioning under the Excise Act, we cannot have assistance of the decision which was delivered in relation to the scope of powers of the authorities functioning under Income Tax Act or other taxing statutes.
21. In fact as rightly pointed out by the learned DR that the issue which is sought to be raised has already been answered by the Larger Bench in Sun Pharmaceutical case. It was held therein thus:-
7. It has been disputed before us that Section 214 of the Income Tax Act relates to the payment of advance tax by an assessee and when the tax so paid had been found to be excess at the time of final assessment that has to be refunded by the department with interest. But no such provision regarding payment of duty in advance by the assessee, exists in the Central Excise Act. Rather duty is payable by an assessee at the time of clearance of the goods from the factory. The Central Excise Act only speaks of provisional assessment under Rule 9B which can be claimed by the assessee or adopted by the deptt. when there is dispute regarding classification of the goods, and the correct Tariff rate of duty leviable on these goods or, where the clearance of the goods has to be made by an assessee under an agreement containing price variation clause. It is only on finalization of that provisional assessment, the excess found duty, if any is required to be refunded to the assessees by the department and even for that refund period of three months has been allowed to the revenue under Section 11BB of the Act. However, while introducing this provision w.e.f. 28.9.96, the legislature thought it fit not to provide for any interest on interest even in case of delay in payment of interest on refund amount. To read the liability to pay interest on interest in the provisions of law contained in Section 11BB of the Act, would virtually amount to legislate upon the Act and that is not the function of the Tribunal which is creation under the said Act itself and has to exercise power conferred upon it under the Act. It may also be added that before the introduction of Section 11BB, the Tribunal had no power to award interest by exercising inherent power, on the amount of refund of duty even if paid late. In this context, reference may be made to the judgement of the Honble Allahabad High Court in the case of Prestige Engineering (India) Pvt. Ltd., vs. Union of India [1991 (51) ELT 255 (All.)] wherein it was ruled as under:-
When the Act (Central Excise) and the Rules made thereunder did not provide for payment of interest in case of refund of duty. It is to be presumed that the Parliament advisedly did not provide for the same, while enacting Section 11B in 1978. The authorities under the Act have to operate within the four corners of the Act and the Rules made thereunder. Since the Act or the Rules did not provide for grant of interest, the authorities under the Act, including the CEGAT, had no power to award interest.
8. In the light of what has been discussed above, on the basis of the above referred two judgments of the Gujarat High Court, which are under different Tax statute, interest on delayed payment of interest, cannot be held to be permissible under the Central excise Act and the Rules made thereunder, for want of any specific provision in the Act or the Rules. Therefore, the Tribunal has no power to award such interest to the assessee. The law laid down in Hindustan Motors vs. CCE (supra), to the contrary, being not a good law, stands overruled. The reference stands accordingly answered.
22. Considering the provisions of law and the facts and circumstances of the case, therefore, we find no infirmity in the impugned order passed by the authorities below and hence the appeal fails and hereby dismissed.
[Justice R.M.S. Khandeparkar] President [Rakesh Kumar] Member [Technical] /Pant/ ??
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