Interest on delayed sanction of refund cannot be denied even if right to claim interest waived by assessee.

Case:- M/s HERO MOTORS LTD Vs COMMISSIONER OF CENTRAL EXCISE, GHAZIABAD

Citation:- 2014-TIOL-574-CESTAT-DEL

Brief facts:-The facts leading to this appeal is that the appellant M/s. Hero Motors Ltd. are engaged in manufacture of two wheeler motor vehicle and parts thereof. The appellant are also export their finished products out of India. They take Cenvat Credit of the Central Excise duty paid on inputs and capital goods and service tax paid on input services used in or in relation to manufacture of their final products. The period of dispute in this case is from July'05 to March'06. In terms of Rule 5 of the Cenvat Credit Rules, 2004, a manufacturer who has availed Cenvat Credit in respect of certain inputs or input services and used the same in or in relation to manufacture of final products which have been exported out of India without payment of duty under bond or Letter of Undertaking, is not required to reverse the credit and he can use the same for payment of duty on the final products cleared for home consumption and if the manufacturer is not in a position to utilize the Cenvat Credit in respect of inputs/input services used in or in relation to manufacture for final products exported out of India under bond without payment of duty, for payment of duty on the goods cleared for home consumption, he would be entitled to cash refund of the accumulated Cenvat Credit subject to conditions as may be specified by the Central Government. One condition mentioned in the Rule itself is that cash refund of accumulated Cenvat Credit would be subject to condition that the manufacturer has not exported the final products under claim of Drawback or under claim for input duty rebate Notification No. 5/-6-CE(NT) dt. 14.03.06 and its predecessor Notification No. 11/02- CE(NT) dt. 01.03.02 issued under Rule 5 of the Cenvat Credit Rules mention other condition for cash refund of the accumulated Cenvat Credit.

In this case, the appellant filed three refund claims under Rule-5 of the Cenvat Credit Rules, 2004 for the amounts of Rs.1,13,11,877/-, Rs.1,11,83,381/-& Rs. 79,41,125/-for the period from July'05 to Sept.'05, Oct.'05 to Dec.'05 and Jan.'06 to March'06. These claims were filed within the stipulated period as prescribed in Notification No.5/06-CE(NT) and there is no dispute about the fulfillment of other condition. However, due to reasons known only to the Department, the refund claims were not finalized in time and were kept pending. Sometime in the year 2008 the Jurisdictional Central Excise Authority woke up to the pendency of these refund claims and also to the possibility having to pay interest under Section 11BB for the period of delay beyond the period of three months from the date by filing of refund claim. The appellant submitted letters dt. 25.09.08, 17.10.08 and 29.10.08 in respect of refund claims for the amounts of Rs.1,13,11,877/-, Rs.1,11,83,381/-& Rs.79,41,125/- respectively mentioning that they understand that the refund claims have been found to be admissible and that since they are interested in getting the amount involved in the refund claim urgently, they will not claim interest which may be due to them on account of delay in sanction of the claims. Each of these three letters accordingly requested the Assistant Commissioner to sanction refund claim at the earliest. Accordingly the Jurisdictional Assistant Commissioner by three separate orders sanctioned the above mentioned claims only with modification that the refund claim for the amount of Rs. 79,41,125/-was sanctioned for an amount of Rs.76,39,996/- and the claim for the balance amount of Rs. 3,01,129/-was rejected and similarly the refund claim of Rs.1,13,11,877/-was sanctioned only for an amount of Rs.1,08,45,105/-and the claim for the balance amount was rejected. The order is silent about the interest for the period ofdelay. The appellant filed the appeals before the Commissioner (Appeals) to claim to interest under Section 11BB, for the period of delay beyond the period of 3 months from the date of filing of the claims. The Commissioner (Appeals) disposed off all these appeals by a common order dt. 24.02.09 by which she dismissed the two appeals as not maintainable as the same are time barred, inasmuch as there was delay of 29 days and 10 days beyond the prescribed limitation period of 60 days on filing of appeal. The third appeal was dismissed on the ground that when the Appellant themselves have given up their claim on interest for the period for delay, they cannot raise this issue at the appellate stage. Against this order of the Commissioner (Appeals) these three appeals have been filed.

Appellant’s contentions:- Sh. Aditya Kumar, Advocate, the learned counsel for the appellant, pleaded that just because the appellant had given up their claim for interest for the period of delay in course of proceeding before the Assistant Commissioner, they would not be prevented from raising this issue before the Appellate Authority, that the Appellant may have been compelled by the Sanctioning Authority to furnish such letters, that the Apex Court in the case of Dunlop India Ltd. & Madras Rubber Factory Ltd. Vs. Union of India and Others reported in 1983 (13) ELT- 1566 (S.C.) = 2002-TIOL-647-SC-CUS-LBhas held that there is no estoppel in Law against a party in taxation matters and therefore, much significance should not be attached to the fact that the appellant had accepted before the Customs Authority that the goods imported by them are V.P.Latex under I.T.C. Item No.87, as they may have accepted this classification under some misapprehension or in accordance with the wishes of the authorities, that the ratio of this judgment of the Apex Court is squarely applicable to the facts of the case, that when Section 11BB provides that interest for the period of delay beyond the period of three months from the date of filing of the refund claim would be payable by the Govt. at the notified rates and since in this case the Authorities did not decide the refund claims within the period of three months from the date of filing of refund claims, the appellant are entitled to interest on the refund amount at the notified rates in terms of the Provisions of Section 11BB, that the Apex Court in the case ofUnion of India Vs. UP Twiga Fiber Glass Ltd., reported in 2000 (243) ELT-A27 (S.C.) has held that a close reading of Section 11BB, which now governs the question relating to payment of interest on belated payment of refund, makes it clear that relevant date for the purpose of determining the liability to pay interest is not the determination under sub-section(2) of Section 11B to refund the amount to the applicant and not to be transferred to the Consumer Welfare Fund, but the relevant date is to be determined with reference to date of application laying claim to refund and non-payment of refund to the applicant within three months from the date of filing of such application brings in the starting points of liability to pay the interest, notwithstanding the date on which decision has been rendered by the competent authority as to whether the amount is to be transferred to Consumer Welfare Fund or to be paid, that though two appeals have been wrongly rejected by the Commissioner (Appeals) as not maintainable on the ground of time bar, as though there was delay of 29 days and 10 days beyond the prescribed limitation period of 60 days for filing of appeals, the appellant had given valid reasons for this delay and hence the Commissioner (Appeals) has wrongly refused the condonation of delay and that in view of the above, the impugned order is not correct.

Respondent’s contentions:-Sh. Pramod Kumar, the learned Joint CDR, defended the impugned order by reiterating the findings of Commissioner (Appeals) and emphasized that once the appellant had given up their claim for interest on refund for the period of delay by submitting letters to this effect to the sanctioning authority, they could not raise this issue before the Appellate Authority for claiming interest for period of delay. He also pleaded that the two appeals which were filed before the Commissioner (Appeals) after delay of 29 days and 10 days from the last date have been correctly rejected as non-maintainable as they have not given any valid reason for the delay in filing of appeals before the Commissioner (Appeals).

Reasoning of judgment:- The impugned order passed by the Commissioner (Appeals) is in respect of three appeals filed by the appellant out of which two appeals were rejected as non-maintainable on the ground of time bar for delay of 29 days and 10 days in filing of appeals. As per the provisions of Section 35A of the Central Excise Act, 1944, the Commissioner (Appeals) on being satisfied that the appellant was prevented for sufficient cause from filing of appeals within the prescribed limitation period of 60 days, may allow an appellant to present the appeal within the further period of 30 days. Thus while the normal limitation period for filing appeal before the Commissioner (Appeals) is 60 days from the date of communications of the order, if the Commissioner (Appeals) is satisfied that there was valid reason for delay in filing of appeals, he can condone the delay up to 30 days. He has no powers of condonation of delay beyond 30 days. In this case there was delay of 29 days & 10 days in respect of two appeals and the other third appeal had been filed within time. The reason given by the appellant was that there was delay in obtaining legal advice. But this reason has not been found satisfactory by the Commissioner (Appeals). In Tribunal’s view the Commissioner (Appeals)'s order holding the two appeals as not maintainable and time barred, is not correct, as the reasons given by the appellant for delay is a valid reason, as they had filed appeals claiming interest for the period of delay against the background of the fact that they had earlier given letters to the Authorities giving up their claim for interest for the period of delay. In view of this, we hold that the impugned order in so far as its rejects two appeals filed after the delay of 29 days and 10 days as time barred, is not correct. Coming to issue on merits, in terms of Section 11BB if any duty ordered to be refunded under sub section (2) of the Section 11B to any applicant is not refunded within three months from the date of receipt of application under sub-section (1), there shall be paid to that applicant, interest at rate notified by the Central Government on such duty from the date immediately after expiry of three months from the date of receipt of such application till the date of refund of such duty. Explanation (A) to section 11B provides that "refund" includes rebate of duty of excise on excisable goods exported out of India or on excisable material used in the manufacture of goods which are exported out of India. The refund under Rule 5 of the Cenvat Credit Rules, 2004 in the refund of in cash of the accumulated Cenvat Credit availed by a manufacturer in respect of inputs and input services used in the manufacturer of finished goods which had been exported without payment of duty under bond/LUT and which manufacture is unable to utilize for payment of duty on clearance for home consumption. Clause (c) of Proviso to section 11B(2) refers to the "refund of credit of duty paid on excisable goods used as inputs in accordance with the rules made, or any notification issued under the Central Excise Act, 1944", as the refund claim not hit by the principle of unjust enrichment. Thus section 11B covers the refund of Cenvat Credit mentioned in Clause (c) of the Provision to section 11B(c).

Therefore, the refund claims filed under Rule 5 of the Cenvat Credit Rules, 2004 have also to be treated as refund claim under section 11B and the Proviso of Section 11B(2) would be applicable to the same. The Apex Court in the case of Union of India Vs. U.P. Tariya Fibre Glass Ltd.(Supra) interpreting the provisions of Section 11B has held as under:

"A close reading of Section 11BB, which now governs the question relating to payment of interest on belated payment of refund, makes it clear that relevant date for the purpose of determining the liability to pay interest is not the determination under sub-section (2) of Section 11B to refund the amount to the applicant and not to be transferred to the Consumer Welfare Fund but the relevant date is to be determined with reference to date of application laying claim to refund. The non-payment of refund to the applicant claimant within three months from the date of such application or in the case governed by proviso to Section 11BB, non-payment within three months from the date of the commencement of Section 11BB bring point of liability to pay interest, notwithstanding the date on which decision has been rendered by the competent authority as to whether the amount is to be transferred to Welfare Fund or to be paid to the applicant needs no interference."

In fact the applicability of Section 11BB is not even denied by the Department. The Department, however, seeks to deny the interest on the basis of the letters given by the appellant to the Jurisdictional Assistant Commissioner giving up their claims for interest for the period of delay. This decision of the Commissioner (Appeals) is absolutely incorrect and contrary to the Law laid down by the Apex Court in the case of Dunlop India Ltd. & Madras Rubber Factory Vs. Union of India (Supra) wherein in para 40 of the judgment, the Apex Court has held that there is no estoppel in law against an assessee taxation matters. Besides this, we also find that the Apex Court in case of Union of India Vs. Madhumilan Syntex Ltd. reported in 2007 (195) E.L.T. 141 (S.C.)= 2006-TIOL-160-SC-CX has held that right conferred under the statute cannot be given up on the basis of concession made by any party to the lis. In Tribunal’s view, the ratio of the above judgments of the Apex Court is squarely applicable to the facts of this case. Therefore, just because the appellant by the letters addressed to the Jurisdictional Assistant Commissioner had given up their claim for interest on the amount of refund for the period of delay in sanction of the refund claims, they would not be estoppel from challenging the denial of interest and claiming the same when they are entitled for the same under the statutory provisions of Section 11BB. The impugned order is set aside and the Department is directed to pay the interest in terms of the provisions of Section 11BB. The appeals filed by the appellant are accordingly allowed.

Decision:- The appeal is allowed.

Comment:- The crux of this case is that right given by a statue cannot be given up on the basis of waiver from the assessee. As far as the assessee is eligible to claim refund of interest on delayed sanction of refund, the same will be admissible to the assessee as per the provisions of law even if on earlier occasion, the assessee has waived his right to claim interest.

Prepared by: Monika Tak

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