Custom, Excise & Service Tax Tribunal
Tamil Nadu Air Products Pvt.Ltd vs Commissioner Of Customs (Port-Export) on 12 July, 2016
IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
SOUTH ZONAL BENCH AT CHENNAI
Appeal No.C/40543/2013
[Arising out of Order-in-Appeal C.Cus.No.1365/2012 dt. 2911.2012 passed by the Commissioner of Customs (Appeals), Chennai]
Tamil Nadu Air Products Pvt.Ltd.
Appellant
Versus
Commissioner of Customs (Port-Export),
Chennai Respondent
Appearance:
Shri M. Masilamani, Consultant For the Appellant Shri K.P. Muralidharan, AC (AR) For the Respondent CORAM:
Honble Shri P.K.Choudhary, Judicial Member Date of hearing :08.07.2016 Date of Pronouncement :12.07.2016 FINAL ORDER No.41089/2016 The issue is relating to the claim of interest on SED of RS.1,27,090/-. There is also claim of interest on the delayed refund of interest sanctioned to the appellant.
2. In the impugned order, the learned Commissioner (Appeals) has sanctioned the interest from 11.3.2008 till the date of sanctioning refunds at the appropriate prescribed rate.
3. Shri M. Masilamani, Ld. Consultant, appearing for appellant submits that since the department had collected SED forcefully without any authority of law the appellant had to struggle for almost six years to get back the same. Hence they are rightly eligible for interest of Rs.90,753/- along with interest on the same. The claim of interest was for the period from 05.02.2004 to 07.05.2010. But the appellate authority in his order sanctioned interest for the period 11.03.2008 to 25.08.2009 resulting in denial for a major period from 27.2.2004 to 10.03.2008.
3.1 He also submits that the appellants are entitled to payment of interest on belated payment of interest on refund in view of apex Court's judgement in the case of Sandvik Asia Ltd. Vs Commissioner 2006 (196) ELT 257 (SC) which has been followed by this Tribunal in the following cases :-
(i) Sundar Steels Ltd. Vs CCE Hyderabad 2008 (225) ELT 472 (Tri.-Bang.) (II) VBC Industries Ltd. Vs CCE 2008 (225) ELT 375 (Tri.-Bang.) and
(iii) Final Order No.1770/2009 dt. 18.11.2009 passed by Chennai Bench in the case of Standard Pencils (P) Ltd. Vs CCE Chennai reported in 2010 (253) ELT 160 (Tri.-Chennai)
4. Shri K.P. Muralidharan, A.C., Ld. A.R for the Revenue defends the impugned order. He submits that when there is no provisions under the Customs Act to sanction interest on delayed payment of interest and therefore appellant's plea cannot be accepted. He placed reliance on the jurisdictional Madras High Court judgement in the case of Commissioner of Customs (Exports), Chennai Vs VBC Industries Ltd. 2011 (270) ELT 314 (Mad.).
5. After hearing both sides, let me first take up the issue of claim of interest on delayed refund. I find that it would be appropriate to reproduce Section 27A of the Customs Act :-
"SECTION 27A. Interest on delayed refunds. If any duty ordered to be refunded under sub-section (2) of section 27 to an applicant 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 that applicant interest at such rate, not below five per cent and not exceeding thirty per cent per annum 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 27 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 applicant interest under this section from the date immediately after three months from such date, till the date of refund of such duty.
Explanation. Where any order of refund is made by the Commissioner (Appeals), Appellate Tribunal, National Tax Tribunal or any court against an order of the Assistant Commissioner of Customs or Deputy Commissioner of Customs under sub-section (2) of section 27, the order passed by the Commissioner (Appeals), Appellate Tribunal , National Tax Tribunal or as the case may be, by the court shall be deemed to be an order passed under that sub-section for the purposes of this section.
Reading of the above goes to show that duty ordered to be refunded is to be paid within three months from the date of application. In the instant case, this has not been done. The Commissioner (Appeals) in the impugned order at para-7 held as under :-
"7. From the above, it is clear that up to the stage of the rejection of refund, and sanctioning of the same to the consumer welfare fund and sanctioning the same to the appellant by the LAA is legal and proper. However, I find from the impugned letter of communication as admitted by the LAA himself, that the appellant had cooperated with the department and submitted all the necessary documents by 11.3.2008. The LAA should have processed the claim without waiting further, and should have sanctioned the refund amount at least within three months from the above date, i.e. on or before 10.6.2008, in stead of doing so, the LAA prolonged the matter by sending a deficiency memo on 9.6.2009 and with a personal hearing on 10.6.2009, which shows that the LAA never studied/verified the documents available with the refund sanction. However, the claim was sanctioned within two months from the above date. This is not at all acceptable and definitely there is a delay by the department from 11.3.2008 till the date of sanctioning refunds. In view of the above discussions and the facts stated therein, I allow the appeal partially by directing the department to pay interest from 11.3.2008 till the date of sanctioning of the refund amount at the appropriate prescribed rate. The appeal is disposed off as above".
The Ld. Commissioner (Appeals) has granted refund from 11.03.2008 holding that the appellant had submitted all the necessary documents only on that date. The requirement of the department is only to cure few defects which cannot be a ground to deny the interest on delayed refund beyond three months. The appellants are therefore eligible for claiming the interest which is beyond three months from the date of receipt of the application sometime in the year 2004. The Commissioner of Customs is directed to pay the dues accordingly.
6. As regards the claim of "interest on interest", I find that the Hon'ble Madras High Court in the case of CC (Exports) Vs VBC Industries Ltd. (supra) relied upon by Revenue has distinguished the Hon'ble Supreme Court's judgement in the case of Sandvik Asia Ltd. Vs Commissioner (supra). The relevant paragraph of the said order is reproduced as under :-
"14.?Given the settled principle of law that the Legislature knows the law prevailing at the time when the amendment was brought forth and that the Legislature has chosen to restrict the grant of interest on delayed refunds alone, it is difficult to stretch the language in Section 27A to accept the plea of the assessee that it is entitled to interest on the interest too on the score that Section 27(2) contemplated refund of duty and interest. The provision, as it stands under Section 27A of the Act, has to be read as restricted to claim on duty alone and it cannot be extended to include interest within its fold for the purpose further grant of interest under Section 27A of the Act.
.... ....
16.?In the decision reported in [2006] 280 ITR 643 - Sandvik Asia Ltd. v. CIT, filed as against the judgment of the Bombay High Court reported in 267 ITR 78, the Supreme Court considered the grant of interest for the delay in the payment of amount due to the assessee, which were held contrary to law. The Supreme Court held that Section 214(1) recognises in principle, the Government has the liability to pay interest on the amount of tax paid by an assessee in excess of the amount of assessed tax. Once the interest becomes due, it takes the same colour, as the excess amount of tax refundable to the assessee, on regular assessment. Consequently, as advance tax is treated as paid in pursuance of an order of assessment, interest is payable under Section 244 of the Income Tax Act. The expression amount in Section 244(1A) of the Income Tax Act, refers not only to tax, but also to interest, the term being a neutral expression. Thus, reversing the decision of the Bombay High court, the Apex Court held that the assessee was entitled to interest on the amount of interest paid under Section 214 and/or Section 244 of the Income Tax Act.
.... ...
20.?It must be noted herein that the decision of the Apex Court is based on the interpretation of the word any amount as appearing in Sections 240 and 244(1A) of the Income Tax Act and in the absence of any specific provision on grant of interest on the belated refund of the interest component, it applied the general principles. Quite apart, even otherwise, the facts therein indicated that the claim of the assessee was by way of writ Petition, challenging the order of the Commissioner, rejecting the claim of the assessee for interest. Hence, the decision relied on by the learned Senior Counsel appearing for the assessee has to be understood in the context of the facts therein and the provisions of law and the same cannot be of any assistance to the assessee herein.
21.?As regards the applicability of general principles herein to the case, it must be pointed out that the proceedings before this Court is by way of appeal, as against the order of the CESTAT, made in exercise of Appellate Jurisdiction under the provisions of the Customs Act. In considering the question of law raised by the Revenue, one has to go in accordance with the provisions of the customs Act and not by the general principles of law.
22.?The reliance placed by the Appellate Tribunal to the decision reported in [2002] 245 ITR 606 CIT v. Narendra Doshi has no relevance for considering the claim of the assessee under the Customs Act. As regards the reliance placed on the decision reported in [1980] 123 ITR 429 (Mahalakshmi Sugar Mills Co. v. C.I.T.), it relates to a claim on expenditure on the interest paid on belated payment on sugarcane cess; hence, the said decision does not help the assessee herein.
23.?In the light of the discussion thus made, going by the provisions under Section 27A of the Customs Act, we do not agree with the reasoning of the CESTAT. Consequently, the Civil Miscellaneous Appeal stands allowed and the substantial questions of law raised before this Court are answered in favour of the Revenue. No costs. As regards the belated refund ordered, the assessee shall be entitled to interest only on the duty and not on the interest amount."
7. I also find that Tribunal's Single Member bench decision relied upon by counsel in the case of very same assessee - VBC Industries Ltd. Vs CCE - 2008 (225) ELT 375 (Tri.-Bang.) stands distinguished by the Division Bench of the Bangalore Bench in the case of Virchow Laboratories Ltd. Vs Cex. & Cus., Hyderabad 2012 (280) ELT 133 (Tri.-Bang.). The relevant paragraphs of said Tribunal's order is reproduced as under :
"6.?After considering the rival submissions, we are of the view that the issue agitated before us is already covered in favour of the Revenue by the Tribunals Larger Bench decision in Sun Pharmaceuticals case (supra) wherein it was held that interest on delayed payment of interest was not permissible under the Central Excise Act and/or the rules made thereunder. The Larger Bench found that there was no specific provision in the Act or the rules for payment of such interest. It therefore held that the Tribunal had no power to award such interest to any claimant. We also note that, in the case of Sun Pharmaceuticals Ltd., the Larger Bench had also considered and distinguished the case of Commissioner of Income Tax v. Narendra Doshi [254 ITR 606 (SC)] before taking the above view. Therefore the view taken by the Tribunals Division Bench relying on the apex courts judgment in Narendra Doshis case cannot be considered as a precedent. The apex courts decision in the case of Sandvik Asia Ltd. (supra) is also not applicable to the instant case inasmuch as, in that case also, the court was dealing with certain issues arising under the Income Tax Act. The question to be decided by us is whether this Tribunal has power to award interest on delayed payment of interest to the assessee. The Tribunals Larger Bench has already settled this issue by holding that this Tribunal has no such power for want of specific provision in the Central Excise Act/Rules for payment of interest on delayed payment of interest. The Larger Bench decision is equally applicable to a claim for interest on delayed payment of interest on Customs duty in the absence of specific provisions in the Customs Act and the rules made thereunder. The Larger Bench decision is binding on this Bench."
The other Single Member decision relied upon by counsel in Sundar Steels Ltd. Vs CCE (supra) was distinguished by the Division Bench of the Tribunal in the case of International Industrial Gases Ltd. Vs CCE, Bhopal - 2010 (254) E.L.T. 518 (Tri. - Del.). Respectfully following the order of jurisdictional Hon'ble Madras High Court in the case of CC (Exports) Chennai Vs VBC Industries (supra), I hold that appellant is not entitled to grant of interest on payment of interest on refund.
8. Therefore, I pass the following order
(i) the interest on delayed refund is directed to be paid which is beyond three months from the date of application for refund.
(ii) plea for interest on interest is rejected.
The appeal is disposed of in the above terms.
(Order pronounced in open court on 12.07.2016) (P.K.CHOUDHARY) JUDICIAL MEMBER gs 8