Commissioner of Central Excise vs Ballarpur Industries Ltd.

D.K. Deshmukh and V.C. Daga, JJ.—The facts that are material and relevant for deciding this appeal are that the Respondent M/s. Ballarpur Industries Ltd. is holder of central excise registration and is engaged in the manufacture of paper and paper board falling under CSH 48 of the first schedule to the Central Excise Tariff Act, 1985. The Respondent submitted an application u/s 11B of the Central Excise Act for refund of Excise duty paid by it. The claim of the Respondent for refund was rejected by the Assistant Commissioner of Central Excise and Customs by Order, dated, 5th May, 1998. The Respondent submitted second application for refund of Excise Duty u/s 11B of the Act to the tune of Rs. 24,00,925. That application for refund was also rejected by the Deputy Commissioner of Central Excise and Customs by Order, dated, 23rd March, 2000. They made third claim for refund u/s 11(b) of the Act for refund of Excise Duty to the tune of Rs. 62,96,976. That application was also rejected by Order, dated, 29th May, 1998. Being aggrieved by these Orders, the Respondent-company preferred an appeal before the Commissioner (Appeals), Central Excise, Pune. The Commissioner (Appeals), Central Excise, Pune by Order, dated, 10th February, 2003, set aside the Orders rejecting refund claim of Rs. 96,71,550 and Rs. 24,00,925. The Commissioner (Appeals) by another Order, dated, 7th February, 2003 set aside the Order rejecting refund of Rs. 62,96,976 and the Commissioner (Appeals) held, that the Respondent-company was entitled to refund of Excise Duty. Thereafter, the Respondent-company made a claim for interest u/s 11BB of the Act on the refunded amount. The Respondent-company was claiming interest from the date on which the period of three months expired from the date of receipt of application for refund u/s 11B of the Act till the date payment is deemed to have been made. The claim of interest was rejected by the Assistant Commissioner by Order, dated, 6th February, 2004. The Respondent - company filed appeal against that Order. That appeal was allowed by Order, dated, 23rd September, 2004 and the Appellate Authority held, that the Respondent-company was entitled to payment of interest u/s 11BB of the Act. That Order was challenged in the appeal by the department. That appeal has been rejected by the Tribunal by Order, dated, 11th December, 2006. The Tribunal has held, that the refund has to be made within three months from the date of filing of application for refund and not from the date on which Order is made directing the refund. The case of the department is that as the refund was made within the period of three months from the date of the Order passed by the Appellate Authority sanctioning the refund, no interest u/s 11BB of the Act is payable.

For considering this appeal, the substantial question of law which, according to the learned Counsel appearing for Appellant, arises is "Whether the Tribunal was justified in holding that interest is payable u/s 11BB of the Act. According to the learned Counsel, interest u/s 11BB of the Act is payable only when an Order for refund is made by the Assistant Commissioner of Central Excise or Deputy Commissioner of Central Excise. He relied on the provisions of Sub-section (2) of Section 11B of the Act in support of his submission.

On the other hand the learned Counsel appearing for Respondent relying on the explanation appearing below Section 11BB of the Act submits that interest is payable even if refund is Ordered not by the Order made by the Assistant Commissioner or Deputy Commissioner, but if the refund is Ordered either by the Appellate Authority or Tribunal or Court.

Now in Order to decide this appeal, it is necessary to refer first to Sections 11B(1) and 11B(2) of the Act. They read as under:

Section 11B. Claim for refund of duty:

(1) any person claiming refund of any duty of excise may make an application for refund of such duty to the (Assistant Commissioner of Central Excise or Deputy Commissioner of Central Excise) before the expiry of (one year)(from the relevant date)[[in such form and manner] as may be prescribed and the application shall be accompanied by such documentary or other evidence (including the documents referred to in Section 12A as the Applicant may furnish to establish that the amount of duty of excise in relation to which such refund is claimed was collected from, or paid by, him and the incidence of such duty had not been passed on by him to any other person:

Provided that where an application for refund has been made before the commencement of the Central Excises and Customs Laws (Amendment) Act, 1991, such application shall be deemed to have been made under this Sub-section as amended by the said Act and the same shall be dealt with in accordance with the provisions of Sub-section (2) of substituted by that Act:]

[Provided further that] the limitation of [one year] shall not apply where any duty has been paid under protest.

(2) If, on receipt of any such application, the [Assistant Commissioner of Central Excise or Deputy Commissioner of Central Excise] is satisfied that the whole or any part of the duty of excise paid by the Applicant is refundable, he may make an Order accordingly and the amount so determined shall be credited to the Fund: Provided that the amount of duty of excise as determined by the [Assistant Commissioner of Central Excise or Deputy Commissioner of Central Excise] under the foregoing provisions of this Sub-section shall, instead of being credited to the Fund, be paid to the Applicant, if such amount is relatable to-

(a) rebate of duty of excise on excisable goods exported out of India or on excisable materials used in the manufacture of goods which are exported out of India;

(b) unspent advance deposits lying in balance in the Applicant''s account current maintained with the (Commissioner of Central Excise);

(c) refund of credit of duty paid on excisable goods used as inputs in accordance with the rules made, or any notification issued, under this Act;

(d) the duty of excise paid by the manufacturer, if he had not passed on the incidence of such duty to any other person;

(e) the duty of excise borne by the buyer, if he had not passed on the incidence of such duty to any other person;

(f) the duty of excise borne by any other such class of Applicants as the Central Government may, by notification in the Official Gazette, specify: Provided further that no notification under Clause (f) of the first proviso shall be issued unless in the opinion of the Central Government the incidence of duty has not been passed on by the persons concerned to any other person.

Perusal of Sub-section (1) of Section 11B of the Act shows that an application for refund of duty paid is to be made to the Assistant Commissioner of Central Excise or Deputy Commissioner of Central Excise in prescribed form and the documents that may be necessary for deciding the application are also to be submitted. Perusal of Sub-section (2) of Section 11B of the Act shows that, thereafter, the Authority viz. Assistant Commissioner or Deputy Commissioner are required to hold inquiry and if at the end of the inquiry the Authority is satisfied that whole or part of the duty paid is to be refunded then an Order can be made accordingly by the Authority. Then comes Section 11BB of the Act, which reads as under:

Section 11BB: Interest on delayed refunds.

If any duty Ordered to be refunded under Sub-section (2) of Section 11B to any Applicant is not refunded within three months from the date of receipt of application under Sub-section (1) of that Section, there shall be paid to that Applicant interest at such rate, [not below five percent] and not exceeding thirty per cent per annum as is for the time being fixed [by the Central Government, by Notification in the Official Gazette], on such duty from the date immediately after the expiry of three months from the date of receipt of such application till the date of refund of such duty:

Provided that where any duty Ordered to be refunded under Sub-section (2) of Section 11B in respect of an application under Sub-section (1) of that Section made before the date on which the Finance Bill, 1995 receives the assent of the President, is not refunded within three months from such date, there shall be paid to the Applicant interest under this Section from the date immediately after three months from such date, till the date of refund of such duty.

Explanation.- where any Order of refund is made by the Commissioner (Appeals), Appellate Tribunal [National Tax Tribunal] or any Court against an Order of the [Assistant Commissioner of Central Excise or Deputy Commissioner of Central Excise], under Sub-section (2) of Section 11B, the Order passed by the Commissioner (Appeals), Appellate Tribunal or, as the case may be, by the Court shall be deemed to be an Order passed under the said Sub-section (2) for the purposes of this Section.]

Perusal of the above provision shows that Section 11BB of the Act comes into operation only after an Order for refund has been made u/s 11B of the Act. It lays down that in case any duty paid is found refundable then if the duty is not refunded within a period of three months from the date of receipt of the application to be submitted u/s 11B of the Act, then interest on the amount is liable to be paid on expiry of period of three months from the date of receipt of the application. The Explanation appearing below Section 11BB of the Act shows that it introduces deeming fiction that where the Order for refund of duty paid is made not by the Assistant Commissioner of Central Excise or Deputy Commissioner of Central Excise but is made by the Commissioner (Appeals), Appellate Tribunal or by the Court, then for the purpose of this Section the Order made by the Commissioner (Appeals), Appellate Tribunal or by the Court shall be deemed to be an Order made under Sub-section (2) of Section 11B of the Act. Thus, the purpose of introducing explanation was to introduce deeming fiction that for the purpose of Sub-section (2) of Section 11B if the Order is made not by the Assistant Commissioner or Deputy Commissioner, but by the higher authorities, the Order made by the higher authorities shall be deemed to be an Order made by the Assistant Commissioner or Deputy Commissioner for the purpose of Sub-section (2) of Section 11B of the Act. The explanation has nothing to do with the postponement of the date from which interest becomes payable u/s 11BB of the Act. Interest u/s 11BB of the Act becomes payable on expiry of period of three months from the date of the receipt of the application for refund if the amount is not refunded within three months from the date of receipt of the application. The learned Counsel appearing for Respondent also relied in support of his submission on the Judgments of various High Courts. However, in our opinion, the position of law is absolutely clear that the interest is payable u/s 11BB of the Act on expiry of period of three months from the date of receipt of the application and that Explanation appearing below Section 11BB of the Act does not have any effect or connection with the date from which interest u/s 11BB of the Act becomes payable. The only purpose served by the explanation, as observed above, is to introduce a deeming fiction which is relevant for the purpose of Sub-section (2) of Section 11B of the Act. Thus, we do not find that any question of law arises, and therefore, the appeal is rejected and it is disposed of.