Ganesh Enterprises @Hash Commissioner Of Central Excise, Ahmedabad

This appeal has been filed by M/s. Ganesh Enterprises against denial of interest on refund claim.

The facts of the case are that appellants is a manufacturer of Cellulose powder and were availing exemption under SSI Notification. The Central

Excise officer visited the unit in August, 2007 and seized records of the appellant M/s. Ganesh Enterprises and M/s. Dhariyal Chemicals and Shri

Yogesh C. Dhariyal, paid Rs. 15 Lakhs on the spot. The case against the appellants apparently is that M/s. Dhariyal Chemicals and M/s. Ganesh

Enterprises is only one unit and Rs. 15 Lakhs deposited was towards the amount payable by M/s. Ganesh Enterprises. The appellant’s claim that

the amount of Rs. 15 Lakhs deposited was actually filled in by the officers themselves in the blank cheques recovered by officers from their premises.

These blank and signed cheques were kept in the drawer of the table so that when the proprietor is not available, the employees can withdraw money

and use it for emergencies. Later on the appellants submitted a refund claim on 24.12.2007 which was rejected by both the lower authorities. The

Tribunal vide order No. A/2496/WZB/AHD/2008 dated 18.11.2008 observed that the appellate authority have not specifically denied that blank

cheques were recovered, filled in and paid into the credit of Government. Consequently, the appeal was allowed with consequential relief to the

appellant. The Revenue challenged the order before the Hon’ble Gujarat High Court however, the Revenue’s appeal was rejected on

21.01.2009 by the Hon’ble High Court. The appellant again wrote a letter seeking refund of Rs. 15 Lakhs deposited by them along with interest on

10.02.2009. Thereafter, the Revenue confirmed the demand of duty on merit and the amount of Rs. 15 Lakh was adjusted against the said demand.

The refund application was again rejected on the ground that said amount of Rs. 15 lakh was appropriated vide order-in-original No. 48/Addl.

Commr./2009 dated 27.02.2009 against the confirmed demand of Rs. 46,40,538/-. The said rejection of the refund claim and confirmation of demand

was challenged by the appellant before the Commissioner (Appeals) who dismissed their appeal. Against the said dismissal, the appellant approached

Tribunal. The Tribunal vide order No. A/12197-12200/2018 dated 22.10.2018 allowed their appeal both on merits as well as on the issue of refund.

The refund was granted by Revenue vide order No. 11/AC/18-19/Refund dated 07.03.2019, however no interest was granted.

Against denial of interest, appellant approached the Commissioner (Appeals) who rejected the claim of interest on the ground that in terms of

Section 35FF of Central Excise Act, 1944, interest is only to be granted after expiry of three from the date of order of appellate authority. Learned

Counsel for the appellant pointed out that Section 35FF applies only to refunds arising as a result of deposited under Section 35F and not to refund and

interest claimed under Section 11B of Central Excise Act, 1944. While observing the Commissioner (Appeals) has pointed out that Rs. 5 Lakh was

paid by the appellant against the stay order issued by the appellate authority during the month of September 2009 as pre-deposit under Section 35F and

Rs. 50,000/- paid by the appellant under protest against the order-inoriginal against redemption fine during the month of the August 2011. Learned

Counsel pointed out that there is no claim of interest in respect of Rs. Five lakh deposited as pre-deposit and Rs. 50,000/- deposited as redemption

fine. He argued that they are claiming interest from the date of original application only in respect of Rs. 15 Lakh which was recovered from them by

cheques taken away by department in the month of September 2007. In view of this, learned Counsel pointed out that the provisions of Section 35FF

are not applicable to the refund of Rs. 15 Lakhs which was erroneously taken in September 2007 and for refund of which they have filed application

on 24.12.2007 itself.

Learned Counsel relied on the decision of Hon’ble Apex Court in the case of Ranbaxy Laboratories Limited vs. UOI â€" 2013 (273) ELT 3

(SC) wherein in Para 9, the Apex Court has clarified on the issue. He argued that in terms of the said decision, they are entitled to refund of Rs. 15

Lakh along with interest from three months of date of original application made on 24.12.2007. Learned Counsel further pointed out that the

adjustment done of Rs. 15 Lakh against the demand confirmed was illegal. He argued that such adjustment cannot be done unless the demand is

finally confirmed and is not challenged. He pointed out that in the instant case, the demand was confirmed on 27.02.2009 and the said amount was

appropriated vide order dated 02.03.2009, i.e. not even allowing them to approach the higher forum for stay and challenge. He relied on the decision of

Tribunal in the case of Voltas Limited vs. CCE, Hyderabad â€" 2006 (201) ELT 615. He argued that in the said decision it has been held that such

adjustment can only be made when the demand has reached finality and this provision should not be invoked at the initial stage.

Learned Counsel also relied on the following decisions to assert that even if the amount is adjusted against any demand, interest is required to be

paid from the date of original application of refund claim if the same becomes due later on:-

(a) Munch Food Products Limited vs. CCE â€"2016 (337) ELT 428

(b) Voltas Limited vs. CCE- 2006 (201) ELT 615

(c) CCE vs. Sterlite Industries (I) Limited â€"2007 (212) ELT 520

(d) Jubilant Organosys Limited vs. CCE â€"2014 (301) ELT 542

(e) Vipor Chemicals P. Limited vs. UOI â€"2002 (146) ELT 511 (Guj).

Learned Counsel further pointed out that no separate application is required to be filed as consequent of order of any appellate authority allowing the

refund claim. He pointed out that they have made application on 24.12.2007 and thereafter in continuance of the process they first got relief from

Hon’ble Gujarat High Court and thereafter again by Tribunal in the second round of litigation. The entire process is continuous and one against the

single claim of refund.

Learned Authorised Representative pointed out that no application for interest was made. He pointed out that Section 11B requires to make claims

for duty as well as interest. He further pointed out that the show cause notice demanding duty in offence case was issued prior to order of Tribunal

directing refund. He further relied on Section 11B(5)(b)(ec) to assert that the interest is to be calculated from three months from the date of final

order of Tribunal allowing refund claim. He pointed out that the refund has been issued within three months from the date of order of Tribunal

therefore, there is no question of interest. He relied on the Tribunal decision in the case of Ashima Limited vs. CCE & ST, Ahmedabad â€" 2019

(369) ELT 967 (Tri. Ahmd.) wherein he claimed that under similar circumstances the claim of refund was restricted to the period from three months

of final confirmation of demand by Hon’ble Apex Court for part amount and refund was granted from the date of original application.

Learned Counsel in rejoinder stated that the decision in the case of Ashima Limited (supra) was on the different facts and circumstances. He

pointed out that in that case no refund claim was filed while in their case, they have filed refund claim. He pointed out that there has been one

continuous litigation which reached the Hon’ble High Court in first round of litigation and Tribunal in the second round against the same claim and

this is third round in which it has again reached Tribunal.

I have gone through the rival submissions. I find that Commissioner (Appeals) has rejected the claim of interest of refund solely on the ground that

same is hit by the provision of Section 35FF. It is seen that the said refund claim is consisting of three items:-

(i) Rs. 15 Lakh deposited by the appellant in the month of September 2007 against duty demand.

(ii) Rs. 5 Lakh was paid by the appellant against stay order issued by the appellate authority during the month of September 2009 as predeposit.

(iii) Rs. 50,000/- was paid by the appellant under protest against the OIO as redemption fine in lieu of the confiscation of goods during the month of

August 2011.

While Rs. 15 Lakh was recovered by encashment of cheques in September 2007, the balance amount of Rs. 5 Lakh and Rs. 50,000/- was paid

against stay order and redemption fine in lieu of confiscation, respectively. Learned Counsel claimed that there is no claim of interest on Rs. 5 Lakh

and Rs. 50,000/-. He asked for interest in respect of Rs.15 Lakh which was recovered from them by encashment of cheques in the month of

September 2007. He argued that Section 35FF has no application in the instant case. He argued that the amount of Rs. 15 Lakh was not deposited

under Section 35F and therefore question of application of Section 35FF to the facts and circumstances of the present case does not arise.

I am in agreement with the claim of the learned Counsel that the amount of Rs. 15 Lakh deposited was not under the provisions of Section 35F and

therefore, the provisions of Section 35FF which reads as under, will not apply:-

“Section 35FF in the Central Excise Act, 1944

[35FF Interest on delayed refund of amount deposited under the proviso to section 35F. â€" 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 communication of the order of the appellate authority, till the date of refund

of such amount.]

It is clear from the above that Section 35FF is only for recoveries made under Section 35F. In these circumstances, I have no doubt in holding that

order of Commissioner (Appeals) is incorrect and based on wrong premise.

Learned Authorised Representative argued that no application for refund of interest is made under Section 11B on 24.12.2007. He argued that

Section 11B is relevant to claim the interest. It is seen that Section 11B reads as under:-

“Section 11B. Claim for refund of duty and interest, if any, paid on such duty â€" (1) 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, if any, paid on usch duty to the

Assistant Commissioner of Central Excise or Deputy Commissioner of Central Excise …… …….. …….. …….â€​

I find that the appreciation of learned Authorised Representative regarding Section 11B is improper and incorrect. The reference to refund of

“interest†in Section 11B, is to the interest, if any, paid by the assessee along with duty. Section 11B does not apply to the claim of interest on the

refund of duty to the appellant. In respect of claim of interest of duty to the appellant, Section 11BB applies. Section 11BB prescribes that:-

[Section 11BB. Interest on delayed refunds.â€"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 per cent. 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. ………. ……… ……..….â€​

In view of above, I do not find any merit in the argument of the learned Authorised Representative that the appellants were required to claim interest

along with refund of duty. I find that Section 11BB prescribes that interest is to be granted suo-moto along with refund.

Learned Authorised Representative further raised the issue regarding Section 11B(5)(B)(ec) which reads as under:-

Section 11B(5) in the Central Excise Act, 1944

[Explanation - For the purposes of this Section, -

(A) “refund†includes 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) “relevant dateâ€​ means, -

[(ec) in case where the duty becomes refundable as a consequence of judgment, decree, order or direction of appellate authority, Appellate

Tribunal or any court, the date of such judgment, decree, order or direction;]

I find that the said provisions relate to the relevant date are for the purpose of limitation. I find it has no application so far as the claim of interest on

the refund is concerned.

Learned Authorised Representative also relied on the decision of the Tribunal in the case of Ashima Limited (supra) where in in Para 5, following

has been observed:-

“5. As per the above clear position of law considering with the facts of the present case, the refund application filed by the applicant was

admittedly filed on 14-7-1999 only, thereafter, the cause of action for refund arises. Since an amount i.e. 60 Lacs minus adjudged due as

per order in original, dated 21-4-1999 become refundable and the same should have been sanctioned within 3 months from date of filing of

application i.e. 14-7-1999. Accordingly, on such balance amount the interest is payable from 3 months of date of filing the refund i.e. 14-7-

1999. As regard remaining amount of refund that has arisen only from the date of Tribunal order dated 12-6-2002 by which the demand

confirmed by the original order was set aside, that means the amount of duty which was set aside by the Tribunal become refundable from 3

months of Tribunal order dated 12-6-2002. Accordingly, on such amount interest is payable from 3 months of date of Tribunal order. As

regard the submission of Ld. Counsel that it is a deposit made during investigation which was otherwise not required, the interest is payable

from the date of deposit, we do not agree with this submission of the Ld. Counsel for the reason that the appellant has suo motu deposited

an amount of Rs. 60 Lacs and admittedly the refund application for the same was filed on 14-7-1999, therefore, since the appellant

themselves have not claimed the refund earlier, there is no question of sanction of the same and consequential interest from the date of

deposit. The Hon’ble Supreme Court in the case of Ranbaxy Laboratories Ltd. (Supra), clearly held that in case of refund, interest is

payable from 3 months of the date of filing of application. In the present case, the period for interest has to be reckoned not only with

reference to filing of refund application but also as per the provision of explanation (B)(ec) of Section 11B, therefore, interest is payable in

accordance with said provision. As per our above observation, the appeal is partly allowed in above terms.â€​

Learned Counsel for the appellant pointed out that the facts in the case in Ashima Limited (supra) are significantly different. He pointed out that no

claim of refund was filed till after confirmation of demand. He pointed out that while the appellant has deposited Rs. 60 Lakh and part of the demand

was confirmed on 31.03.1999 and balance become refundable. The claim of refund was filed on 14.07.1999 i.e. after the adjudication process. He

pointed out that in the present case, the refund claim was filed way back December 2007 and it has been continuously agitated before the Tribunal for

the entire amount of Rs. 15 Lakh. He pointed out that in the said case, the amount was deposited whereas in the case in hand, the Revenue had taken

the cheques lying in their office premise and recovered the amount on their own. I find that facts are significantly different in the case.

In this regard, Hon’ble Apex Court in the case of Ranbaxy Laboratories Limited (supra) observed as follows:-

“9. It is manifest from the afore-extracted provisions 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.â€​

In view of the above discussions and relying on decision of the Hon’ble Apex Court in the case of Ranbaxy Laboratories (supra), I find that

impugned order is not sustainable and the same is set-aside. The appeal is allowed.

(Pronounced in the open court 05.11.2020)