Rajiv Gupta

The moot question is what the worth of the laws in this country is! Are they even worth the paper on which they are printed? The officials indulge into outright cheating & even abuse the beneficiary or issue veiled threats. This is the ground reality & no one seems to be bothered. The CBEC allowed a time period of 90 days from the date of the submission of the Rebate claim & Refund under Rule 5 for the settlement of the refund claims. The readers will note that 90 days in itself is too long a period for the exporter to block his capital & the cost of capital is very high in this country. However, no interest is paid to the exporters even if the claims are credited to the account of the exporters beyond 90 days. The officials which include several layers from Asst./Dy. Commissioner, Joint Commissioner, Addl. Commissioner, Commissioner, Chief Commissioner & Principal Chief Commissioner & notwithstanding the Commissioner (Appeals) are all very well aware of the provisions of the law but these gentlemen in position show no respect for the law or the CBEC Circular & even the Supreme Court. They indulge into frivolous litigation to tire the exporter & ultimately rob the beneficiary in broad daylight. When you take up the matter, with the Commissioners they scoff at you as if you have committed a crime by asking for the legitimate interest. Even the Commissioner (Appeals) raises eyebrows when you say that appeal has been filed for the claim of interest. It is pertinent to point out that the department pays a paltry interest @ 6% p.a. whereas they charge interest at 2 ½ times in case of default on the part of the assessee. Are the officials in a position to forego the collection of interest even if there was a force majeure condition? The answer is emphatic no. The law strictly applies for the collection of interest but not the payment of interest? Can this be the way to implement the law? The CAG audit of the department or any other audit will only point out those cases where the department officials failed to collect the interest but they will never point out those cases where the beneficiaries are robbed off the legitimate interest due to them. It is difficult to believe that why such a lopsided approach prevails? If this is the behaviour of the government of the day what type of example you are setting & how do you then think that the government deserves respect? Respect can only prevail if the responsible officials are made to abide by the law & ensure implementation of the same for the real benefit of the beneficiaries.

Now, we see the anomalies. The pertinent fact is that CBEC circulars are binding on the department as held in innumerable judicial pronouncements. The relevant CBEC circular No. 670/61/2002-CX dated 1-10-2002 contains the following:

“2. In this connection, Board would like to stress that the provisions of section 11BB of Central Excise Act, 1944 are attracted automatically for any refund sanctioned beyond a period of three months. The jurisdictional Central Excise Officers are not required to wait for instructions from any superior officers or to look for instructions in the orders of higher appellate authority for grant of interest.”

# emphasis supplied by us

Therefore, it is crystal clear that liability to pay interest is attracted automatically whenever refunds are not carried out within 90 days for whatsoever reason (unconditionally). Therefore, there cannot be any liability fastened on the applicant to claim interest. Please note that the law has to be read the way it is written therefore there is no room for any interpretation for the department to escape the interest liability. Please note that any sane person will understand that there cannot be any claim of interest in the application in itself because it is wrong to presume that the department will not settle the claim within the statutory time period. The interest is a consequence of delayed action & the liability rests on the department automatically & cannot be avoided for whatsoever reason.

Further, please note that the CBEC circular says that the C. Ex. Officer does not require any instruction from any superior officer for interest payment i.e. the authority & responsibility is vested on the refund sanctioning officer to grant interest if the refund is delayed beyond 90 days from the date of submission. Therefore the provision of the law is crystal clear that once there is a delay, the official needs to settle the claim with interest without demur. Therefore, once again, it is crystal clear that there is no request required from the applicant to pay interest otherwise, why will CBEC issue such a clarification by way of a circular.

Finally, please note that the CBEC circular categorically states that there is no order required for payment of interest from any of the appellate authorities. The department will appreciate that in several hundreds of cases of refunds, appeals are filed on everyday basis & the appeal decisions do not carry any directive to pay interest. This does not mean that the department is absolved of the payment of interest liability. The CBEC circular spells out in no uncertain words that there is no order required from any higher/appellate authority for the payment of interest then why & how the refund applicant be denied interest even if there is no directive for payment of interest in the order. Thus once again, there is no doubt that interest liability is fastened on the department & as per the gentleman’s behavior, the official of the government of India should pay interest without demur. This is what the CBEC has spelt out in the circular & the department is bound to implement it. We therefore fail to understand that why this could not be seen & upheld in the spirit of the law.

Last but not the least important is the fact that why the government of India should believe that the inefficiency of the officials (failing to settle the claims within the stipulated time limit) should bring in benefits for the department because the department gets to use the money of the applicant without paying the interest. Do you really think that the Government of India is indulging into it through the officials of the department?

The most significant point is that why the field formations are not willing to appreciate the spirit of law & that there is no free lunch in this world. Does the field formations mean to say that the CBEC members did not even understand the implications of what they were putting in by the way of the circular or the circular is simply a showcase but not be implemented.

As per Apex Court vide 2011 (273) E.L.T. 3 (S.C.) in case of RANBAXY LABORATORIES LTD. Versus UNION OF INDIA, it is clearly held that Section 11BB of the Act comes into play only after an order for refund has been made under Section 11B of the Act. Section 11BB of the Act lays down that in case any duty paid is found refundable and if the duty is not refunded within a period of three months from the date of receipt of the application to be submitted under sub-section (1) of Section 11B of the Act, then the applicant shall be paid interest at such rate, as may be fixed by the Central Government, on expiry of a period of three months from the date of receipt of the application. The Explanation appearing below Proviso to Section 11BB introduces a deeming fiction that where the order for refund of duty is not made by the Assistant Commissioner of Central Excise or Deputy Commissioner of Central Excise but by an Appellate Authority or the Court, then for the purpose of this Section the order made by such higher Appellate Authority or by the Court shall be deemed to be an order made under sub-section (2) of Section 11B of the Act. It is clear that the Explanation has nothing to do with the postponement of the date from which interest becomes payable under Section 11BB of the Act. Manifestly, interest under Section 11BB of the Act becomes payable, if on an expiry of a period of three months from the date of receipt of the application for refund, the amount claimed is still not refunded. Thus, the only interpretation of Section 11BB that can be arrived at is that interest under the said Section becomes payable on the expiry of a period of three months from the date of receipt of the application under sub-section (1) of Section 11B of the Act and that the said Explanation does not have any bearing or connection with the date from which interest under Section 11BB of the Act becomes payable. Therefore, the issue stands finally settled.

Any person with little common sense will understand that this is insubordination of the CBEC circular & the contempt of the apex Court because that law is to be complied with & cannot be flouted but then right up to the Principal Chief Commissioner does not seem to be bothered? Why no action is ever taken against these officials by the GoI? Why cheating is acceptable & if that is the truth can you expect me to respect these cheats!

Similarly, in case of the appeals being filed before the commissioner Appeals as well as the CESTAT, the department started collecting a deposit @ 7.5% & 10% respectively. After enactment of the Finance Act (No.2), 2014 with effect from 06.08.2014, Section 35F of the Central Excise Act, 1944 and Section 129E of the Customs Act, 1962 have been substituted with new sections to provide for mandatory pre-deposit as a percentage of the duty demanded where duty demanded is in dispute or where duty demanded and penalty levied are in dispute. Where penalty alone is in dispute, the pre-deposit shall be calculated on the penalty imposed. This mandatory pre-deposit was announced with much fanfare as part of ease of doing business & no hearings to be carried out for the purpose of the grant of stay as such. The GoI also promised that thereafter there will be no coercive action taken. However, even this promise is not being fulfilled diligently.

Further, as per the legal provisions as enumerated by NACEN, Kanpur, the following has been very clearly spelt out.

Where the appeal is decided in favour of the party/assessee, he is entitled to refund of the amount deposited along with the interest at the prescribed rate from the date of making the deposit to the date of refund in terms of Section 35FF of the Central Excise Act, 1944 or Section 129EE of the Customs Act, 1962.

The pre-deposit for filing appeal is not payment of duty. Hence, refund of pre-deposit need not be subjected to the process of refund of duty under Section 11B of the Central Excise Act, 1944 or Section 27 of the Customs Act, 1962.

Where the appellate authority has decided the matter in favour of the appellant, refund with interest should be paid to the appellant within 15 days of the receipt of the letter of the appellant seeking refund, irrespective of whether order of the appellate authority is proposed to be challenged by the Department or not. If the Department contemplates appeal against the order of the Commissioner (A) or the order of CESTAT, which is in favour of the appellant, refund along with interest would still be payable unless such order is stayed by a competent Appellate Authority.

In the event of a remand also, refund of the pre-deposit is payable along with interest. However, in case of partial remand where a portion of the duty is confirmed, it may be ensured that the duty due to the Government on the portion of order in favour of the revenue is collected by adjusting the deposited amount along with interest.

Refund of pre-deposit made NOT to be withheld on the ground that Department is proposing to file an appeal or has filed an appeal against the order granting relief to the party.

The judicial discipline needs to be followed by the officials of the department & frivolous litigation avoided. Vide order (2010 (255) E.L.T. 526 (Bom.) COMMR. OF CENTRAL EXCISE Versus TECHNO ECONOMIC SERVICES PVT. LTD.),  the Mumbai High Court has ruled in no uncertain terms that prudent policy should be followed & unnecessary litigation avoided. The laws are crystal clear & the Chief Commissioner is obligated to ensure compliance with the law but then once again nobody is bothered. Why such ground reality is tolerated by the CBEC/CAG/CVC etc. Why there is absolutely no action taken against the real culprits i.e. those who indulge into insubordination & contempt. Why the Chief Commissioners or CBEC show no guts to do that? If no action is taken then can the people have faith in the written word of the law?

(Above are personal view of Author and author can be reached at rajiv.pec@gmail.com)

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