Case Law Details
HEG Ltd. Vs Commissioner, CGST, Division-III, Bhopal (CESTA Delhi)
CESTAT Delhi held that interest @6% per annum is payable u/s 35FF of the Excise Act in case the amount of pre-deposit is not refunded within three months of the date of communication of the order of the Tribunal.
Facts-
M/s. HEG Limited has filed this appeal to assail the order dated 23.08.2018 passed by the Commissioner (Appeals) that modifies the order dated 14.05.2018 passed by the Assistant Commissioner on the letter submitted by the appellant on 26.03.2018 (received by the department on 19.04.2018) for a refund of an amount of Rs.3,23,09,687/- that the appellant claims was deposited by it on 10.06.2012 under section 35F of the Central Excise Act 1944.
This appeal has been filed claiming interest on the delayed refund of deposit of Rs. 3,23,09,687/- in terms of section 35FF of the Excise Act.
Conclusion-
Held that it was the duty of the Assistant Commissioner to have made the refund of the predeposit within three months suo moto on acquiring knowledge of the order passed by the Tribunal but that was not done.
Thus, in view of the provisions of section 35FF of the Excise Act, it has to be held that since the amount deposited by the appellant under section 35F of the Excise Act was not refunded to the appellant within three months from the date of communication of the order of the Tribunal, the appellant would be entitled to interest after the expiry of three months from the date of the order of the Tribunal till the date of refund of such amount at the rate of six per cent per annum.
FULL TEXT OF THE CESTAT DELHI ORDER
M/s. HEG Limited1 has filed this appeal to assail the order dated 23.08.2018 passed by the Commissioner (Appeals) that modifies the order dated 14.05.2018 passed by the Assistant Commissioner on the letter submitted by the appellant on 26.03.2018 (received by the department on 19.04.2018) for refund of an amount of Rs.3,23,09,687/- that the appellant claims was deposited by it on 10.06.2012 under section 35F of the Central Excise Act 19442. The Assistant Commissioner sanctioned an amount Rs.2,03,24,058/- as credit in the CENVAT credit account of the appellant and the remaining amount of Rs.1,19,85,629/- was sanctioned in cash. Thus, the entire amount of Rs.3,23,09,687/- was sanctioned in favour of the appellant. The Commissioner (Appeals) modified the said order of the Assistant Commissioner to the extent that the amount of Rs.2,03,24,058/- sanctioned by the Assistant Commissioner in the CENVAT credit account of the appellant was also to directed be paid in cash. However, the claim made by the appellant for payment of interest under section 35 FF of the Excise Act was rejected by the Commissioner (Appeals). This appeal has been filed claiming interest on the delayed refund of deposit of Rs.3,23,09,687/- in terms of section 35FF of the Excise Act.
2. The appellant is engaged in the manufacture of graphite electrodes falling under Tariff Item No. 8545 11 00 of the First Schedule to the Central Excise Tariff Act, 1985. Four show cause notices for the period September 2004 to August 2010 were issued to the appellant proposing to deny CENVAT credit of Rs.1,05,72,174/- on courier services and insurance services. Four more show cause notices for the period September 2004 to March 2011 were also issued to the appellant proposing to deny CENVAT credit of Rs.97,51,884/- on port services, cargo handling services and custom house agent services. These eight show cause notices, were adjudicated by two separate orders, both dated 13.03.2012, passed by the Commissioner, wherein the entire demand totalling to Rs.2,03,24,058/- (Rs.1,05,72,174/- + Rs.97,51,884/-) was confirmed with interest and equal penalty.
3. The appellant deposited the duty demand of Rs.2,03,24,058/-through CENVAT credit account on 10.06.2012 and also deposited the interest amounting to Rs.1,19,85,629/- through the PLA account.
Thereafter, the appellant filed two appeals before the Tribunal for setting aside the duty demands. The appellant also filed stay applications for waiver of penalty amount and by an order dated 08.10.2012 the Tribunal disposed of the stay applications by granting waiver of deposit of penalty amount since the duty and interest had already been deposited by the appellant. The Tribunal, ultimately allowed both the appeals filed by the appellant by an order dated 28.06.2017 and the entire demand of Rs.2,03,24,058/- was set aside.
4. The appellant contends that as a consequence of the final order dated 28.06.2017 of the Tribunal, the amount of Rs.2,03,24,058/-towards duty and Rs.1,19,85,629/- towards interest totalling to Rs.3,23,09,687/- that was deposited by the appellant under section 35F of the Excise Act as a pre-condition for filing the appeal before the Tribunal became automatically refundable to the appellant but as the amount was not disbursed for a considerable period of time, the appellant submitted a letter dated 26.03.2018, (which was received by department on 19.04.2018) with a request that in terms of the final order dated 28.06.2017 of the Tribunal, the amount of Rs.2,03,24,058/- plus Rs.1,19,85,629/- deposited by the appellant on 10.06.2012 should be refunded to the appellant with interest.
5. The Assistant Commissioner, by order dated 14.05.2018, held that the amount in question was in the nature of „pre-deposit‟ and in view of order dated 28.06.2017 passed by the Tribunal, refund of such amount of Rs.3,23,09,687/- was admissible. However, only part of such amount, i.e. Rs.1,19,85,629/- was sanctioned for refund in cash and the balance amount of Rs.2,03,24,058/- was allowed as credit. No observation was made by the Assistant Commissioner regarding interest admissible to the appellant on the amount of Rs.3,23,09,687/- that was deposited by the appellant. The relevant portion of the order dated 14.05.2018 passed by the Assistant Commissioner is reproduced below:
“6. In view of the CESTAT Final No. A/5453854539/2017 EX [DB] dated 28.06.2017, the refund claim of Rs. 3,23,09,687/- is admissible.
7. Since, it is a case of pre-deposit of duty, the clause of unjust enrichment is not applicable in the instant case. Accordingly, I hold that refund of the amount of Rs. 3,23,09,687/- is permissible to the claimant.
The claimant has paid such duty amounting to Rs. 2,03,24,058/- through CENVAT Credit, the same may be refunded through Credit only. Further, the claimant has paid interest amounting to Rs. 1,19,85,629/- in cash, the same may be refunded in cash. The claimant has fulfilled all the conditions given in the notification.”
(emphasis supplied)
6. Feeling aggrieved, the appellant filed an appeal against the order dated 14.05.2018 before the Commissioner (Appeals) contending that the amount of Rs.2,03,24,058/- should be paid to the appellant in cash instead of credit and interest should also be paid on the amount of Rs.3,23,09,687/- that had been sanctioned in favour of the appellant. The Commissioner (Appeals), by the order dated 23.08.2018, directed that the balance amount of Rs.2,03,24,058/-, should also be paid to the appellant in cash, but the claim for interest on the deposit of Rs.3,23,09,687/- was rejected. The relevant portion of the order dated 23.08.2018 passed by the Commissioner (Appeals) is reproduced below:
“9. xxxxxxxxx. The adjudicating authority is directed to sanction the said amount in cash which has been ordered to be re-credited in the Cenvat credit account.
10. The appellant has also claimed interest on delayed sanction of refund for the period after 3 months from the date of the order of the Tribunal. The submission is not acceptable. As per section 11BB of the Act, interest is payable for the period after three months from the date of refund claim till the date of sanction. xxxxxxxx.
11. Consequent to favourable order of the Tribunal, the appellant filed a claim for refund of credit reversed by them on 19.04.2018 and the refund has been sanctioned within 3 months of the filing of the refund claim. Therefore, there is no case for grant of interest under Section 11BB of the Act. I may mention that Section 11B and 11BB are the only provisions which empower the adjudicating authority to sanction refund and interest respectively.
12. The appellant have placed reliance on the Board‟s Circular No. 802/35/2004-CX dated 08.12.2004. The submission is not acceptable and the reliance on the said circular is misplaced. The said circular relates to refund of pre-deposit whereas the instant refund claim in the instant case cannot be considered as refund claim of pre-deposit. xxxxxxxxx.
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15. xxxxxxxx. There was no direction from the Tribunal for making any pre-deposit as a pre condition for hearing the appeal. The said order also does not acknowledge or mention any pre-deposit made by the appellant. It was only when they made a refund claim supported by documentary evidences that the fact of reversal of credit under protest in pursuance of adjudication order and its linkage with the order passed by the Tribunal was established. The appellant have taken nearly 10 months to establish this linkage and bring it to the notice of the department. The appellant cannot be rewarded with interest for this delayed action on their part. In other words, the said reversal cannot be considered as pre-deposit for the purpose of Board Circular dated 08.12.2004. Therefore, the claim for interest made by them is not tenable.
(emphasis supplied)
7. Shri B.L. Narasimhan, learned counsel for appellant made the following submissions:
(i) The letter dated 26.03.2018 submitted by the appellant cannot be treated as an application under section 11B of the Excise Act, when in terms of Board Circulars such an application was not required to be filed for refund of pre-deposit;
(ii) Consequently, when the pre-deposit amount was not sanctioned in cash within three months from the order dated 28.06.2017 passed by the Tribunal, interest became admissible in terms of section 35FF of the Excise Act;
(iii) A certified copy of the final order dated 28.06.2017 was issued to the appellant only on 28.07.2017, i.e. after GST regime. Therefore, cash refund was admissible for the pre-deposit made from CENVAT credit along with applicable interest;
(iv) The method of payment of pre-deposit does not determine interest eligibility. Once it is accepted that amount of Rs.3,23,09,687/- is in the nature of pre-deposit, interest becomes payable for the entire amount in case of delayed refund; and
(v) Interest is payable from the date when appeal was allowed till the date of disbursal of pre-deposit amount in cash.
8. Shri O.P. Bisht, learned authorised representatives appearing for the Department, however, supported the impugned order and made the following submissions:
(i) The show cause notice issued to the appellant for recovery of the amount was adjudicated by the Assistant Commissioner on 13.03.2012. Thus, the duty of excise due from the appellant was determined under section 11A (10) of the Excise Act. As per section 11A (10) of the Excise Act, the appellant was liable to pay the said duty of excise so determined along with interest due on such amount whether or not the amount of interest is specified separately. Thus, the appellant deposited the duty along with interest on 10.06.2012, as per the requirement of the section 11A(14) of the Excise Act and not under section 35F of the Excise Act as claimed by the appellant;
(ii) The application for refund filed by the appellant before department also clearly mentioned that it was filed under section 11B and request for interest was made in terms of section 11BB of the Excise Act. Thus, the appellant cannot claim interest under section 35FF of the Excise Act;
(iii) As the refund was sanctioned by the competent authority on 14.05.2018, i.e., within 3 months of filing of application of refund on 19.04.2018, the appellant is not entitled to interest;
(iv) The Circulars, on which reliance has been placed by the appellant, are misplaced. The said Circulars relate to refund of pre-deposit, whereas in the instant case, the amount was deposited under protest consequent upon the passing of the order by the Commissioner and cannot be considered as a refund claim of pre-deposit in terms of section 35F of the Excise Act; and
(v) The cases relied upon by the appellant are not applicable as in those cases the amount was deposited either during the investigation before the issue of show cause notice or the amount was ordered to be deposited in terms of section 35F of the Excise Act.
9. The submissions advanced by the learned counsel for the appellant and the learned authorized representative appearing for the department have been considered.
10. The issue that arises for consideration in this appeal is whether the appellant had deposited Rs.3,23,09,687/- under section 35F of the Excise Act because if it was such a deposit then the appellant would be entitled to interest under the provisions of section 35 FF of the Excise Act.
11. It would, therefore, be necessary to reproduce the provisions of sections 35F and 35FF of the Excise Act, as they stood prior to 06.08.2014, and they are as follows:
Section 35F prior to 6.8.2014
“35 F: Deposit, pending appeal, of duty demanded or penalty levied.–
Where in any appeal under this Chapter, the decision or order appealed against relates to any duty demanded in respect of goods which are not under the control of Central Excise authorities or any penalty levied under this Act, the person desirous of appealing against such decision or order shall, pending the appeal, deposit with the adjudicating authority the duty demanded or the penalty levied:
PROVIDED that where in any particular case the Commissioner (Appeals) or the Appellate Tribunal is of opinion that the deposit of duty demanded or penalty levied would cause undue hardship to such person, the Commissioner (Appeals) or, as the case may be, the Appellate Tribunal, may dispense with such deposit subject to such conditions as he or it may deem fit to impose so as to safeguard the interest of revenue:
PROVIDED FURTHER that where an application is filed before the Commissioner (Appeals) for dispensing with the deposit of duty demanded or penalty levied under the first proviso, the Commissioner (Appeals) shall, where it is possible to do so, decide such application within thirty days from the date of its filing.
Explanation:- For the purposes of this section “duty demanded” shall include,-
(i) xxxxxxxxx
(ii) xxxxxxxxx
(iii) xxxxxxxxx
(iv) xxxxxxxxx
(v) Interest payable under the provisions of this Act or the rules made thereunder.
Section 35FF prior to 6.8.2014
“35 FF: Interest on delayed refund of amount deposited under the proviso to section 35F.
Where an amount deposited by the appellant in pursuance of an order passed by the Commissioner (Appeals) or the Appellate Tribunal (hereinafter referred to as the appellate authority), under the first proviso to section 35F, is required to be refunded consequent upon the order of the appellate authority and such amount is not refunded within three months from the date of communication of such order to the adjudicating authority, unless the operation of the order of the appellate authority is stayed by a superior court or tribunal, there shall be paid to the appellant interest at the rate specified in section 11BB after the expiry of three months from the date of the order of the appellate authority, till the date of refund of such amount.”
12. It is seen that prior to 06.08.2014, section 35F required the person desirous of filing an appeal against an order relating to any duty demanded to deposit the duty demanded, but the Tribunal could, under the first proviso, direct for dispensing with the deposit subject to such conditions that the Tribunal deemed fit to impose to safeguard the interest of the Revenue if it was of the opinion that the deposit of duty demanded would cause undue hardship to such a person. It also needs to be noticed that the „duty demanded‟ referred to in section 35F would include interest payable under the provision of the Excise Act or the Rules made thereunder, as is clear from Explanation (v) to Section 35F. Thus, if the appellant was desirous of filing an appeal before the Tribunal against the order dated 13.03.2012 passed by the Commissioner, it was imperative for the appellant under section 35F to deposit with the adjudicating authority the duty demanded and the penalty levied. The appellant contends that it is for this reason that it deposited Rs.2,03,24,058/- towards the duty demanded and Rs.1,19,85,629/- towards interest. For the penalty levied by the Commissioner, the appellant filed an application before the Tribunal for waiver of the penalty amount and the Tribunal by an order dated 08.10.2012 granted waiver of the penalty amount since the duty and interest had already been deposited by the appellant.
13. Learned authorised representative appearing for the department, however, submitted that the amount was deposited by the appellant as duty and, therefore, is liable to be refunded under section 11B of the Excise Act and so no interest can be paid to the appellant under section 35FF of the Excise Act.
14. Section 11B of the Excise Act deals with claim for refund of duty and interest, if any, paid on such duty. Sub-section (1) of section 11B of the Excise Act provides that any person claiming refund of any duty of excise and interest, if any, paid on such duty may make an application for refund of such duty and interest to the Assistant Commissioner of Central Excise before the expiry of one year from the relevant date. It is, therefore, clear that section 11B of the Excise Act would only apply for claim of refund of duty and interest, if any. It would have no application in a case where the applicant seeks refund of the pre-deposit amount.
15. The Assistant Commissioner, in the order dated 14.05.2018, did hold that the amount deposited by the appellant was in the nature of the pre-deposit and it is for this reason that the refund claim of Rs.3,23,09,687/- was allowed. However, the amount of Rs.2,03,24,058/- was refunded through CENVAT credit and the remaining amount of Rs.1,19,85,692/- was paid in cash. The appellant desired that the entire amount should be paid in cash and, therefore, filed an appeal before the Commissioner (Appeals). The Commissioner (Appeals), in the order dated 23.08.2018, directed that the amount of Rs.2,03,24,058/- should also be paid in cash to the appellant. However, no interest was directed to be paid to the appellant on the amount that was refunded.
16. What, therefore, that needs to be considered in this appeal is as to whether the appellant is entitled to interest under section 35FF of the Excise Act on the delayed refund of amount. The Assistant Commissioner did not examine this issue. The Commissioner (Appeals) rejected the claim by treating the refund to have been claimed by the appellant under section 11B of the Excise Act and consequently making applicable the provisions of section 11BB of the Excise Act that deals with interest on delayed refunds. As noticed above, the claim of the appellant was under section 35F of the Excise Act and not under section 11B of the Excise Act. Mere mention of a wrong provision in the letter submitted by the appellant will not work to the prejudice of the appellant if in law the refund claimed by the appellant can be traced to section 35F of the Excise Act. Interest was, therefore, required to be paid to the appellant under the provisions of section 35FF of the Excise Act and not under section 11BB of the Excise Act.
17. This issue was examined by the Bombay High Court in Suvidhe Ltd vs. Union of India3 and it was held that section 11B of the Excise Act cannot be invoked in case of pre-deposit of duty in compliance of section 35F of the Excise Act for maintaining an appeal before the Tribunal since the pre-deposit is not a payment of duty and is only a condition set out for filing an appeal before the Tribunal and such amount is bound to be refunded when the appeal is allowed. The Special Leave Petition filed by the Department before the Supreme Court against the aforesaid decision of the Bombay High Court was dismissed on 07 August, 1996.
18. It transpires that after the decision of the Bombay High Court in Suvidhe Ltd., the Central Board of Excise and Customs issued a Circular dated 2 January, 2002 in connection with the return of deposit made under section 35F of the Excise Act or section 129E of the Customs Act, 1962 and the same is reproduced below;
“The issue relating to refund of pre-deposit made during the pendency of appeal was discussed in the Board Meeting. It was decided that since the practice in the Department had all along been to consider such deposits as other than duty, such deposits should be returned in the event of the Appellant succeeds in appeal or the matter is remanded for fresh adjudication.
2. It would be pertinent to mention that the Revenue had recently filed a Special Leave Petition against Mumbai High Court’s order in the matter of NELCO Ltd, challenging the grant of interest on delayed refund of pre-deposit as to whether:
(i) the High Court is right in granting interest to the depositor since the law contained in section 35F of the Act does in no way provide for any type of compensation in the event of an appellant finally succeeding in the appeal, and,
(ii) the refund so claimed are covered under the provisions of Section 11B of the Act and are governed by the parameters applicable to the claim of refund of duty as the amount is deposited under section 35F of the Central Excise Act, 1944.
The Hon’ble Supreme Court vide its order dated 26.11.2001 dismissed the appeal. Even though the Apex Court did not spell out the reason for dismissal, it can well be construed in the light of its earlier judgment in the case of Suvidhe Ltd and Mahavir Aluminium that the law relating to refund of pre-deposit has become final.
3. In order to attain uniformity and to regulate such refunds it is clarified that refund applications under section 11B (1) of the Central Excise Act, 1944 or under section 27(1) of the Customs Act, 1962 need not be insisted upon. A simple letter from the person who has made such deposit, requesting the return of the amount, along with an attested Xerox copy of the order-in original or CEGAT order consequent to which the deposit made becomes returnable and attested Xerox copy of the Challan in Form TR6 evidencing the payment of the amount of such deposit, addressed to the concerned Assistant/Deputy Commissioner of Central Excise or Customs, as the case may be, will suffice for the purpose. All pending refund applications already made under the relevant provisions of the Indirect Tax Enactments for return of such deposits and which are pending with the authorities will also be treated as simple letters asking for return of the deposits, and will be processed as such. Similarly, bank guarantees executed in lieu of cash deposits shall also be returned.
4. The above instructions may be brought to the notice of the field formations with a request to comply with the directions and settle all the claims without any further delay. Any deviation and resultant liability to interest on delayed refunds shall be viewed strictly.
5. All the trade association may be requested to bring the contents of this circular to the knowledge of their members and the trade in general.”
19. The aforesaid Circular of the Central Board of Excise & Customs was followed by a Circular dated 8 December, 2004. This Circular also relates to return of deposit made in terms of section 35F of the Excise Act or section 129E of the Customs Act, 1962. The Board took a strict view regarding non return of pre-deposits and directed that pre-deposits shall be returned within three months of the decision of the Appeal in favour of the assessee. It further directed that all Commissioners should ensure implementation of the instructions through a suitable monitoring mechanism. The Circular is reproduced below:-
“Reference earlier instructions on the above subject and looking to the instances arising out of non-implementation of the judicial orders, the Board has reason to review and reiterate the earlier Circulars on the subject of non-implementation of orders of CESTAT or any Final Authority in relation to returning pre-deposits made as per directions of CESTAT or any other Final Authority in terms of Section 35F of the Central Excise Act, 1944 & Section 129E of the Customs Act, 1962. The Board has taken a strict view with regard to non-returning of such deposits.
2. As we are all aware the CESTAT has in a number of such cases awarded interest on pre-deposits where its orders have not been implemented and the Department had challenged this and filed Civil Appeals in the Supreme Court.
3. The Board has noted the observations of the Hon’ble Supreme Court in its order dated 21.9.2004 and has decided that pre-deposits shall be returned within a period of three months of the disposal of the appeals in the assessee’s favour.
4. Accordingly, the contents of the Circular No. 275/37/2000-CX.8A dated 02.01.2002, as to the modalities for return of the pre-deposits are reiterated. It is again reiterated that in terms of Hon’ble Supreme Court’s order such pre-deposit must be returned within 3 months from the date of the order passed by the Appellate Tribunal/Court or other Final Authority unless there is a stay on the order of the Final Authority/CESTAT/Court, by a superior Court.
5. Delay beyond this period of three months in such cases will be viewed adversely and appropriate disciplinary action will be initiated against the concerned defaulting officers. All concerned are requested to note that default will entail an interest liability, if such liability accrues by reason of any orders of the CESTAT/Court, such orders will have to be complied with and it may be recoverable from the concerned officers.
6. All Commissioners may advise implementation of these instructions and ensure their implementation through a suitable monitoring mechanism. Field formation may be suitably informed. Copies of the instruction issued may be endorsed to this office for information.
7. Commissioners under your jurisdiction should be advised that similar matters pending in the High Courts must be withdrawn and compliance reported. The board has also decided to implement the CESTAT Orders already passed for payment of interest and the interest payable shall be paid forthwith.”
20. The decision of the Bombay High Court in Suvidhe Ltd. was followed by the Karnataka High Court in Nestle India Limited versus Asstt. Commissioner of C. Ex., Mysore-II4 and the observations are as follows.
“6. xxxxxxxx. Respondents have issued this endorsement treating the said refund claim as excise duty in the case on hand. This question has been considered by two High Courts, one is of Bombay High Court in Suvidhe Limited v. Union of India reported in 1996 (82) E.L.T. 177 (Bom), and the other one is of Madras High Court in Oswal Agro Mills Limited v. Union of India, 1999 – (XC2)-GJX-4666-MAD (WP No. 6283 of 1998 and MP No. 9694 of 1998 disposed of on 13-10-1999). xxxxxxxxxxx. In these circumstances, the endorsement at Annexure-H has no legs to stand and the same has to fail in the light of the judgment of the Supreme Court confirming the Bombay High Court judgment. Pre-deposit amount cannot be equated to excise duty as held by the Bombay High Court and confirmed by the Supreme Court. I have no hesitation in setting aside Annexure-G in the case on hand. I must also notice at this stage that both Bombay and Madras High Courts have chosen to order refund of the amount along with 15 per cent interest from the date of the order till the date of payment. Same order is to be made in this case also.”
21. The Supreme Court in Union of India vs. Tata SSL limited5 also relied upon its earlier judgment in Commission of Central Excise, Hyderabad vs. ITC Limited 6 and the Circular dated 08 December, 2004 to hold that pre-deposit made as a condition for hearing the Appeal has to be refunded to the assessee with interest when the assessee becomes successful. It needs to be noted that in ITC Limited the Supreme Court had observed as follows:
“The issue in this appeal and in several other appeals is whether the pre-deposit made as a pre-condition for the hearing of the Appeal under the Central Excise Act, 1985 was, on the assessee being ultimately successful, refundable to the assessee with interest. The learned Solicitor General has taken instructions and has stated before this Court that the Central Board of Excise & Customs proposes to issue a circular in connection with the payment of interest on all such pre-deposits. A draft copy of the proposed circular has been handed over to this Court. Having regard to the contents of the draft circular we direct compliance with the final order impugned before us and payment of interest in terms of the draft circular. The draft circular shall be appended to and the contents form part of this order. The appeal is disposed of. In view of this order any judgment of any High Court holding to the contrary will no longer be good law.”
22. The Madras High Court in Estee Auto Pressings (P) Ltd. vs. Commissioner of Central Excise, Chennai-II7 also examined the two Circulars dated 2 January, 2002 and 8 December, 2004 and observed:
“8. In terms of the circular dated 8-12-2004 and in the light of the decision of the Apex Court confirming the view of the Bombay High Court, the pre-deposit to maintain the appeal is not to be equated to the payment of duty to invite the provisions of Section 11B of the Act. Learned counsel for the petitioner submits that the order now passed invoking Section 11B of the Act is unsustainable.
9. On notice, the respondents have filed a counter reiterating the contentions as to the applicability of Section 11B of the Act. I do not think that the view taken by the respondents merits any consideration, in the face of the understanding of the Department shown in the circular dated 2-1-2002 as well as the decision of the Supreme Court.
10. In the circumstances, going by the admitted fact that the pre-deposit was made in terms of Section 35F of the Act, the question of invoking Section 11B of the Act to reject the claim of the petitioner as time-barred, does not arise. As pointed out in the circular dated 2-1-2002, when the claim can be made even by a simple letter along with attested xerox copy of the order in appeal, the question of the Department further adjudicating the matter invoking Section 11A of the Act, hence, does not arise. The Circulars of the Board are binding on the respondents who have the responsibility of respecting the same. More so, in the context of the decision of the Apex Court, the question of re-agitating the issue now does not arise. In the circumstances, accepting the case of the petitioner, the writ petitions are allowed. The respondents are directed to refund the amount within a period of eight weeks from the date of order along with interest at 6% per annum from the date of receipt of the order till the date of payment. No costs. Consequently, M.P. Nos. 1 and 1 of 2010 are closed.”
(emphasis supplied)
23. It would also be useful to refer to the decision of the Delhi High Court in Rakesh Kumar Garg versus Dy. Commr. of Central Excise, Division-I8 and the relevant portion of the judgment is reproduced below:
“2. The order-in-original, made by the Deputy Commissioner was that since the application (for refund) was made on 5-4-2016, it could be granted w.e.f. 13-5-2016 (i.e. within 3 months from the date of receipt of the application). The adjudicating authority therefore, declined to grant any interest even while sanctioning the refund of Rs. 5 crores to the present petitioners.
xxxxxxxxxx
4. This Court is of the opinion that the petitioners are entitled to relief in view of the consistent view taken in this regard by the Courts. In Suvidhe Ltd. v. UOI, 1996 (82) E.L.T. 177 (Bom.), it was held that the amount paid as pre-deposit, for pursuing the appellate remedy or for any other reason mandated by law, cannot be treated as a tax as that is only a condition for pursuing the appellate remedy. This view was affirmed by the Supreme Court in Union of India v. Suvidhe Ltd., 1997 (94) E.L.T. A159 (S.C.). In Nestle India Ltd. v. Assistant Commissioner of Central Excise, 2003 (154) E.L.T. 567 also, a similar view was adopted. The latest judgment of the Karnataka High Court in M/s. W.S. Retail Services v. State of Karnataka, W.P. (C) No. 33176/2017 [2018 (16) G.S.T.L. 36 (Kar.).] and connected cases (decided on 14-11-2017) referred to all these decisions as well as the decision of this Court in Voltas Ltd. v. Union of India & Ors., 1999 (112) E.L.T. 34 (Del.).
xxxxxxxxx
6. In view of the above discussion, the petitioners’ contention that they are entitled to interest from the date of the final order of the CESTAT, is justified and warranted. As to the second submission made with respect to the invalidity of Section 35FF on account of its prospective nature, the Court recollects that the provisions of law ought not to be read in a manner so as to invalidate them. In view of the interpretation preferred by the above judgment, the alleged unconstitutionality no longer subsists.
7. In view of the foregoing discussion, the writ petition is allowed. The impugned order is hereby quashed. The respondents are hereby directed to calculate the interest due and payable to the petitioners, from the date when the appeals were allowed by this Court (i.e. 10-12-2015). The writ petition is allowed in these terms.”
(emphasis supplied)
24. The Bangalore Bench of the Tribunal in Kunj Behari Dye Chem Pvt. Ltd. vs. Commissioner of Central Excise (Appeals-II) Bangalore 9 also observed that pre-deposit amount should be refunded suo moto by the Department without delay and the limitation provided under section 11B of the Excise Act will not be applicable. The relevant paragraph is reproduced:
“4. On a very careful consideration of the issue, I find that in such cases where pre-deposits are made under Section 35F of the Central Excise Act, the decision goes in favour of the Appellant and the pre-deposited amount should be refunded suo moto by the department without much delay. In any case, there is no justification for rejecting refund claim by applying the General limitation act. As the amount claimed as refund is a pre-deposit, the limitation under Section 11B will not be applicable in terms of the decided case laws cited by the learned Counsel. Hence, I order refund claim of the pre-deposit made without any further delay. Thus, the appeal is allowed in the above terms.”
(emphasis supplied)
25. The Chennai Bench of the Tribunal in Commissioner of Central Excise, Madurai v/s Servalakshmi Paper and Board Pvt. Ltd. 10 also held that in regard to a pre-deposit, the time limit provided for under section 11B of the Excise Act would not be attracted and, therefore, the impugned order sanctioning the refund claim was correct.
26. The Commissioner (Appeals) failed to follow the decisions of the Courts, the Tribunal and the instructions issued by the Central Board of Excise Customs through the Circulars dated 2 January, 2002 and 8 December, 2004. These Circulars were issued to ensure compliance of the decisions of the Supreme Court and in clear terms provide that all deposit, other than duty, should be returned in the event of the appellant succeeding in the Appeal. The Board clarified in the Circular dated 2 January, 2002 that in order to attain uniformity and to regulate such refunds, the refund applications should not be insisted upon and a simple letter from a person who had made such deposit for return of the amount with a xerox copy of the order passed by the Tribunal would suffice. The Circular also directs that the instructions should be brought to the notice of the field formation with a request to comply with the directions and settle all claims without any further delay and any deviation and resultant liabilities of interest on delayed refunds shall be viewed strictly. The Circular dated 8 December, 2004 further provides that any delay after the period of three months from the date of the order in favour of the assessee in returning the amount of pre-deposit will be viewed adversely and appropriate disciplinary action will be initiated against the concerned defaulting officers. The Circular dated 8 December, 2004 further directs the officers to note that default will entail an interest liability, and if such liability accrues by reason of the order of Tribunal/Court, such orders will have to be complied with and the amount may be recoverable from the concerned officers. Despite the aforesaid Circulars and the orders of the Supreme Court, the High Courts and the Tribunal, the Commissioner (Appeals) decided to reject the claim of interest on refund of pre-deposit made by the appellant solely on the ground that such claim was made under section 11B of the Excise Act.
27. It is, therefore, more than apparent from the aforesaid decisions of the Supreme Court, the High Courts and the Tribunal and the two Circulars issued by the Central Board of Excise and Customs dated 2 January, 2002 and 8 December, 2004 that any amount deposited as a pre-deposit for maintaining the Appeal has to be refunded with interest and the provisions of section 11B of the Excise Act will not be applicable.
28. Despite the aforesaid pronouncements, the Commissioner (Appeals) rejected the prayer made by the appellant for payment of interest on the pre-deposit amount by treating the claim made by the appellant made under section 11B of the Excise Act. It was the duty of the Assistant Commissioner to have made the refund of the pre-deposit within three months suo moto on acquiring knowledge of the order passed by the Tribunal but that was not done.
29. Thus, in view of the provisions of section 35FF of the Excise Act it has to be held that since the amount deposited by the appellant under section 35F of the Excise Act was not refunded to the appellant within three months from the date of communication of the order of the Tribunal, the appellant would be entitled to interest after the expiry of three months from the date of the order of the Tribunal till the date of refund of such amount at the rate of six percent per annum. The appeal is, accordingly, allowed and the order passed by the Commissioner (Appeals) is modified to the extent indicated above.
(Order Pronounced on 15.12.2022)
Notes:-
1. the appellant
2. the Excise Act
3. 1996 (82) E.L.T. A 177 (Bom.)
4. 2003 (154) E.L.T. 567 (Kar.)
5. 2007 (218) ELT 493 (SC)
6. 2005 (179) ELT 15 (SC)
7. 2017 (346) ELT 72 (Mad.)
8. 2019 (366) E.L.T. 244 (Del.)
9. 2009 (241) ELT 84 (Tri.-Bang.)
10. 2011 (263) ELT 476 (Tri.-Chennai)
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