Shakti Enterprises vs Commissioner of C. Ex.

R. Gururajan, J.—Petitioner M/s. Shakti Enterprises is before me seeking a writ of certiorari to quash Annexure-N insofar as it relates to interest on refunds. Petitioner also wants a direction to the Respondents to pay to the petitioner interest at the rate of 9 per cent per annum on a sum of Rs. 3,77,992.80 from 27-4-1994 and Rs. 2,91,193.00 from 7-9-1994, and on a sum of Rs. 87,561.20 from 16-9-1994 up to the date of payment in terms of Section 11BB of the Central Excise Act, 1944. ("The Act" for short).

Petitioner, a manufacturer and packer of instant coffee, exported the instant coffee packed in cans to various countries without payment of Central Excise duty. According to the petitioner, no excise duty is payable on such goods. Petitioner thereafter filed applications before the second respondent seeking refund of Modvat credit taken on goods used in the manufacture of instant coffee packed in cans. The first claim is for a sum of Rs. 23,941.80. The second claim is for Rs. 3,77,992.80, the third and fourth claims being for a sum of Rs. 3,52,105.20 and Rs. 87,561.20 respectively. Second respondent rejected three claims out of four refund claims i.e., in respect of claims for Rs. 23,941.80, Rs. 3,77,992.80 and Rs. 87,561.20. Aggrieved by the same, petitioner moved the Assistant Commissioner of Central Excise, who rejected the same by his order dated 26-4-1996 (Annexure-B). Aggrieved by the said rejections, an appeal was filed and the appellate authority in terms of his order dated 5-8-1999 (Annexure-C) allowed the appeal and remanded the matter to the Assistant Commissioner for de novo examination and for a decision on merits in accordance with law. After remand, the Assistant Commissioner ordered refund in respect of three items in terms of An-nexure-D. In respect of the fourth claim is concerned, the application was considered and refund was ordered in terms of Annexure-H.

After refund, petitioner by its letters at Annexures-J, K, L and M sought for interest in terms of Section 11BB of the Act. Respondent-1 in terms of Annexure-N has rejected the claim of interest. This order is challenged in this petition.

Respondents have entered appearance. They justify their action by filing a counter. They say that the petitioner if at all is aggrieved, ought to have filed an appeal against the impugned order. Insofar as interest is concerned, they say that no interest is payable since interest was granted within three months from the date of the order of the Assistant Commissioner after remand. They justify their action.

Shri G.K.V. Murthy, learned Counsel for the petitioner reiterated the facts and grounds raised in the petition. He states at the Bar that in terms of Section 11BB of the Act, interest is payable from the date of the application. Per contra, learned Counsel for the respondent supports the impugned order.

After hearing the learned Counsel for the parties, I have carefully perused the material on record.

Material facts reveal of a claim for refund by the petitioner. Refunds have been ordered in terms of the orders available on record. However, the Assistant Commissioner, after remand by the Appellate Commissioner, has chosen to order only refund and not the interest. In the circumstances, petitioner sought for interest in terms of Section 11BB of the Act. While considering the said request Asstt. Commissioner has stated in the impugned endorsement that as regards the interest, the petitioner should have filed an appeal against the two O-I-Os claiming interest on the sanctioned, amounts. It is further stated in the impugned order that once the O-I-Os is passed by the JAC sanctioning the refund, the issue cannot be re-opened by the JDC for consideration of interest.

The facts are not in dispute. Refund is admitted. Refund is made over. What is required to be noted by this Court is the statutory provision providing for interest. Section 11BB of the Act provides for interest on delayed payment. The said section reads as under :

"Interest on delayed payments. - 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.

Provided that where any duty ordered to be refunded under Sub-section (2) of Section 11B in respect of any 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 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."

A reading of Section 11BB would show that if the duty ordered to be refunded under Sub-section (2) of Section 11BB 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. In the case on hand, order is admittedly passed u/s 11BB(1) and refund is ordered u/s 11BB(2) of the Act. Therefore, the petitioner is right in his submission that he gets a statutory right for interest on delayed payment in the absence of disposal of the application under Sub-section (1) of Section 11BB. Any subsequent settlement after remand does not wipe out the statutory right or interest available to a litigant. Therefore, rejection of interest, in terms of Annexure-N requires my interference. There is no need for the petitioner to file an appeal in the absence of an adjudicatory order in respect of interest. Even otherwise, petitioner is only invoking his statutory right. In the circumstances, this Court under Article 226 of the Constitution would be justified in enforcing the statutory right of interest to a litigant. I therefore deem it proper to direct the respondents to pay the interest pay in respect of the amount payable to the petitioner from the date of receipt of the application at 5% in terms of the Act. Petitioner, however, claims 9% in the light of the Notification dated 11-5-2001. Admittedly refund claim is referable to the period prior to 2001. In the circumstances, I am not inclined to grant 9% and, instead I deem it proper to grant 5% from the date of the application, which in my view, would meet the ends of justice. Courts of law have consistently ruled that even in the absence of any provision of interest, Courts can grant interest under Article 226 of the Constitution [Reference Union of India Vs. Coromandel Prodorite Ltd., . Interest in terms of this order is to be settled within three months from the date of receipt of a copy of this order.

Respondents'' Counsel argues that Annexure-N is an appealable order. A reading of Annexure ''N'' would show that it is not an adjudicatory order, and it is only an endorsement. Therefore, no appeal would lie as argued by the Counsel.

Petition is allowed. A direction is issued to the respondents to settle the interest at 5% within 3 months from the date of receipt of this order, from the date of the application till the date of payment. No costs.