Laurel Wires Ltd Vs Commissioner Of Central Excise And Service Tax- Nashik (CESTAT Mumbai)
In a significant decision impacting taxpayers awaiting interest on successful appeals, the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT), Mumbai bench, has ruled that interest must be paid on a pre-deposit amount of ₹20 lakhs refunded to M/s Laurel Wires Ltd following a favourable tribunal order. The ruling sets aside an order by the Commissioner (Appeals), Nashik, which had rejected the appellant’s claim for interest, primarily on grounds related to the procedure and timeliness of filing their appeal seeking this interest.
The case originates from an earlier directive by the CESTAT on March 27, 2011, requiring Laurel Wires Ltd to make a pre-deposit of ₹20 lakhs. Following this, the tribunal rendered its final order in favour of the appellant on May 24, 2018. Subsequently, the tax department refunded the pre-deposited amount of ₹20 lakhs. However, the refund did not include any interest for the period the amount was held by the government.
Claiming a statutory right to interest on the refunded pre-deposit, Laurel Wires Ltd sought this payment. According to the appellant, Section 35FF of the Central Excise Act, as it existed prior to amendments in 2014, provided for the payment of interest on amounts refunded following a successful appeal. While acknowledging that the amount of interest, calculated as per the then-prevailing law, might be modest, the appellant asserted that the denial of this statutory entitlement necessitated further action.
To pursue their claim for interest, the appellant filed an appeal with the Commissioner (Appeals) at Nagpur. This appeal was submitted electronically via email on December 20, 2018. The appellant contended that filing through electronic form was permissible under Section 4 of the Information Technology Act, which allows for legal recognition of electronic records. They argued that this electronic filing was done within the stipulated time period for filing an appeal.
Crucially, the appellant’s decision to file the appeal at Nagpur was based on an instruction contained within the original refund order issued by the Refund Sanctioning Authority, which directed any aggrieved party to file an appeal before the Commissioner (Appeals) at Nagpur.
For a considerable period, no action was taken by the Commissioner (Appeals) at Nagpur regarding the appellant’s email appeal. The matter gained traction only after the respondent department filed an appeal before the Commissioner (Appeals) at Nashik. It was the Commissioner (Appeals), Nashik, who subsequently verified with their counterpart in Nagpur and ascertained that Laurel Wires Ltd had indeed filed their appeal electronically on December 20, 2018, within the prescribed time limit.
Despite this confirmation, the Commissioner (Appeals) at Nashik ultimately rejected the appellant’s claim for interest. The basis for this rejection, as presented during the CESTAT hearing by the department’s representative, appeared to centre on the procedural aspects of the appellant’s initial filing. The department contended that there was no established provision for filing appeals through electronic means and that the appellant had been telephonically advised to file the appeal before the appropriate authority in the prescribed manner. Furthermore, the department suggested that a certified copy of the refund order might not have been submitted along with the electronic appeal to the Commissioner (Appeals) in Nagpur. The Commissioner (Appeals) at Nashik reportedly rejected the subsequent application or appeal for interest filed before him as time-barred, citing a lack of power to condone the delay beyond the statutorily permitted period (typically two months plus a condonable period of 30 days). The department’s representative cited the Supreme Court judgment in Singh Enterprises V/s. Commissioner Central Excise, Jamshedpur (2008(221) E.L.T. 163 (S.C.)) to support the argument against condonation of delay beyond the stipulated period.
Before CESTAT, the appellant’s counsel reiterated that they had followed the instruction in the refund order by filing the appeal at Nagpur within the time limit. They argued that even if Nagpur was the incorrect territorial jurisdiction, the Commissioner (Appeals) there should have either transferred the appeal to the correct forum (Nashik) or returned it to the appellant with instructions. The appellant contended that the entire period during which their appeal was pending before the Commissioner (Appeals) at Nagpur should be excluded for the purpose of calculating the limitation period for filing the appeal at the correct forum. To support this principle of excluding time spent pursuing a remedy in a wrong forum, the appellant cited the Supreme Court decision in M.P. Steel V/s. Union of India [2015] 7 S.C.R. 291, reported in 2016, which held that provisions similar to Sections 5 to 24 of the Limitation Act, concerning computation of limitation, can be referred to.
The CESTAT, after reviewing the case records and considering the submissions from both sides, found merit in the appellant’s arguments. The tribunal noted that the refund order itself had instructed the appellant to file any grievance before the Commissioner (Appeals) at Nagpur. Therefore, the appellant’s action of filing the appeal there on December 20, 2018, was in compliance with the department’s own instruction and was done within the prescribed time frame.
Addressing the procedural issue and the argument regarding the incorrect forum, the CESTAT endorsed the principle established by the Supreme Court in M.P. Steel V/s. Union of India. The tribunal stated that if the Commissioner (Appeals) at Nagpur lacked jurisdiction, the appropriate course of action would have been to transfer or return the appeal. The period during which the appeal remained pending before the Nagpur authority should, therefore, be excluded when computing the limitation period for filing before the Commissioner (Appeals) at Nashik. This application of the principle from M.P. Steel effectively negated the department’s argument that the appeal filed at Nashik was time-barred.
The CESTAT distinguished the Singh Enterprises case cited by the department’s representative, noting that its context involved the legality of a High Court order in a writ petition challenging a Commissioner (Appeals) order, which was not directly applicable to the procedural issue of limitation computation when an appeal is filed in a wrong forum based on departmental instructions.
Furthermore, the tribunal underscored the nature of interest on pre-deposits. Citing Section 35FF, the CESTAT observed that the grant of interest is a statutory right that accrues to the appellant. This interest, as per the section, should be paid at the specified rate after three months from the date the order allowing the appeal is communicated. The tribunal found that this statutory right was denied to Laurel Wires Ltd as interest was not included with the principal refund amount.
In light of these findings, the CESTAT concluded that the Commissioner (Appeals) at Nashik had incorrectly rejected the appellant’s claim. The tribunal set aside the order dated June 14, 2019, passed by the Commissioner (Appeals), Nashik.
The CESTAT directed the respondent Commissioner to pay interest on the refunded amount of ₹20 lakhs. The interest is to be calculated as per the law prevailing prior to June 2014, which likely refers to the provisions of Section 35FF before its amendment. The tribunal mandated that this payment of interest must be completed within two months from the date of the CESTAT order.
This ruling by CESTAT reinforces the principle that time spent pursuing a remedy in a forum indicated by the department should be accounted for in limitation calculations and reaffirms the statutory right of taxpayers to receive interest on pre-deposits refunded following successful appeals.
FULL TEXT OF THE CESTAT MUMBAI ORDER
