Commissioner - Central Excise Customs and Service Tax vs B. Tex Ointment Manufacturing Company

D.A. Mehta, J.—The Appellant-Revenue has proposed following three questions to be the substantial questions of law arising out of order dated 30.9.2008/1.10.2008 made by Customs, Excise and Service Tax Appellate Tribunal (the Tribunal):

6.1.Whether in the facts & circumstances of the case, the Cestat was justified in the eyes of law in holding that the said assessee is eligible & entitled to the quantum of interest at the appropriate rate, as was prevailing during the relevant period, from the completion of the date thereof i.e., three (3) months from the date of the filing of the refund claim?

6.2. Whether the said assessee is eligible & entitled to the quantum of interest upon the refund amount which has become due to the said assessee as a consequential relief through the said order of the Cestat?

6.3. Whether the amount of the said duty, paid under protest, which has been refunded within three (3) months from the date of the said order of the Cestat, can attract, fetch and earn an interest, at all?

The respondent assessee had paid duty @ 15% instead of @ 10% under protest in respect of their product, viz. "B-Tex Ointment" pending approval of the classification list for the period 12.08.1996 to 06.12.1997. After the classification list was decided in favour of respondent assessee a refund claim was preferred.

Vide Adjudication Order No. 309/98 dated 30.11.1998 the Assistant Commissioner rejected the claim on the ground of unjust enrichment. In Appeal, Commissioner (Appeals) vide order dated 22.9.1999 upheld the claim of the assessee that principle of unjust enrichment was not applicable as incidence of excise duty (the disputed portion) was not passed on to the customers. Commissioner (Appeals) remanded matter back to the Adjudicating Authority to determine the exact amount of duty to be refunded in cash and by way of credit in Cenvat Account.

In the second round the Adjudicating Authority once again vide order dated 4.7.2000 made Adjudication Order No. 261/2000 and applying principle of unjust enrichment rejected claim of refund by directing deposit of the refund amount in Consumer Welfare Fund. In the second round of Appeal, Commissioner (Appeals) vide order dated 15.5.2001 confirmed the order made by the Adjudicating Authority. This order was challenged by way of Appeal before the Tribunal. Vide order dated 10.4.2003 the Tribunal allowed the Appeal and held that there was no question of invoking principle of unjust enrichment in the second round as the issue had already been decided by Commissioner (Appeals) in his earlier order dated 22.9.1999 and the limited scope for which the matter had been restored to file of the Adjudicating Authority was to compute the exact amount to be refunded in cash and by way of credit in Cenvat Account.

Thereafter, though the amount of differential duty has been refunded interest was not granted and hence, one more round of litigation ensued. The Respondent-Assessee succeeded before Commissioner (Appeals). The Tribunal vide impugned order dated 30.9.2008/1.10.2008 has upheld the order made by Commissioner (Appeals) and held that in light of Provisions of Section 11BB of the Central Excise Act, 1944 (the Act), Revenue is required to pay interest from the date immediately after the expiry of three months from the date of application made till order of refund of such duty.

On behalf of the Appellant-Revenue, it was submitted that the controversy got settled only on 10.4.2003 when Cestat passed the order of granting refund and therefore in light of Explanation in Section 11BB of the Act, the Assessee was required to make an application after the said order and within three months thereof if refund had not been paid interest was required to be granted. That in the present case, Refund Application had been made sometime in 1997 and therefore could not be termed to be an application within the meaning of Provisions of Section 11B of the Act.

It is not possible to accept the contention raised on behalf of the Appellant-Revenue. The language employed by Provisions of Section 11BB read with Section 11B of the Act is clear and in the facts of the present case, the view adopted by the Tribunal is the only view one can adopt. One cannot lose sight of the fact that the principal dispute on the basis of which claim for refund arose was in relation to classification of the product which became final in 1997. The entitlement of the Assessee to refund of duty which was paid at a higher rate became final, the classification having not been challenged by anyone.

Thereafter, merely because the application for refund was rejected by the Adjudicating Authority and Assessee was constrained to litigate, it does not mean that the right to refund, which had already crystalised in favour of the Assessee, did not exist. The order made by the Tribunal in 2003 merely negatived the stand of the Revenue that the Assessee was not entitled to refund of duty due to principle of unjust enrichment. It was not the stand of the Revenue that the Assessee was not entitled to refund at all, but the stand was that refund of duty could not be granted due to application of unjust enrichment. This is different from taking a stand that a person is not entitled to refund at all. In fact the order made by the Adjudicating Authority in the second round makes this position more than clear, when it was ordered that the refund of duty is to be credited to the Consumer Welfare Fund. In other words, only the recipient of refund was substituted, instead of refund being actually paid to the Assessee the refund was credited to the Consumer Welfare Fund.

In the circumstances, there is no warrant to read Explanation in Section 11BB of the Act to mean that the period for which the Assessee is entitled to interest will start running only from the point of time when an application is made after the order was made by the Tribunal on 10.4.2003.

In this set of facts and circumstances of the case, none of the questions as proposed, or otherwise, can be termed to be questions arising out of the impugned order of the Tribunal. Not only do the questions do not arise out of the impugned order of the Tribunal but in absence of any substantial question of law the Appeal is liable to be dismissed.

The Appeal is accordingly dismissed.

O.J. Civil Application No. 234 of 2009.

In light of the order made in the Appeal, this Civil Application has been rendered infructuous and is rejected accordingly.