Excess interest to be refunded back as rule 8(3) is ultra vires to section 11AB(1) of Central Excise Act

Durga Board and Paper Industries Limited Vs Union of India and another (Punjab and Haryana High Court)

Punjab and Haryana High Court held that Sub-Rule (3) of Rule 8 is ultra vires to Section 11AB(1) of the Central Excise Act, 1944, therefore, excess amount received by the department is to be refunded back. Accordingly, refund of excess interest amount granted.

Facts- Petitioner is engaged in manufacturing of Duplex Board. The present writ petition has been preferred seeking to recover a sum of Rs.3,66,649/- which was paid by the petitioner to the Department as interest in excess of actual interest liability.

As per Rules 8 of the Central Excise Rules, 2002, the petitioner deposited additional interest amount on account of delayed payment of excise duty.  However, the Rajasthan High Court in case of ‘Lucid Calloids Ltd. Vs. Union of India’, 2006(200) ELT-370, held that Sub-Rule (3) of Rule 8 is ultra vires to Section 11AB(1) of the Central Excise Act, 1944, therefore, interest cannot be charged more than 2% per month. Accordingly, the petitioner moved application dated 20.04.2007 before terms of Section 11B of the Act vide order dated 10.07.2007. Thereafter, appeal against the order dated 10.07.2007 was allowed on 01.11.2007. The Department preferred further appeal against the said order and the same came to be decided on 21.12.2009 by the Customs Excise and Service Tax Appellate Tribunal in favour of the department holding the application to be time barred.