Whether refund claim prior to 1.3.1997 is governed by the provisions of Notification no. 6/97 that was prospectively implemented?

PJ/Case law/2013-14/1877

Case:- COMMR. OF CUS. & CENTRAL EXCISE Versus J.K. DRUGS & PHARMACEUTICALS

Citation:- 2013 (29) S.T.R. 634 (All.)

Brief facts:- M/s. J.K. Drugs & Pharmaceuticals Ltd., Gajraula engaged in the manufacture of P.P. Medicines falling under Central Excise Traffic Heading No. 2941.90 of Central Excise Tariff Act, 1985, filed claims amounting to Rs. 43,96,108.24 under Rule 57-F(4) of Central Excise Rules, 1944, for refund of duty paid on inputs used in the manufacture of their final products, which were exported out of India under a bond without payment of Central Excise Duty. At the time of filing the claim, the relevant documents against which Modvat credit was taken, were not submitted. The appellant was asked to file the relevant documents. These documents were submitted on a later date i.e. after issuance of Notification No. 6/97 (NT), dated 1-3-1997. With the issuance of Notification No. 6/97 (N.T.), dated 1-3-1997, the credit of specified duties lying unutilized on the first day of March 1997, stood lapsed and could not be allowed to be utilized towards the payment of duty on excisable goods whether cleared for home consumption, or for export. A show cause notice was issued to the appellant on 1-6-1999, proposing to reject the claim on the ground that the credit stood lapsed on 1-3-1997. The case was adjudicated by rejecting the claim vide order-in-original No. 5/Ref/MBD/99 dated 29-4-2002. The appellant filed appeal in CEGAT against the order-in-appeal.

Appellant’s contention:- The appellant submits that the refund has already been made to the assessee. The interest on refund will be made by the Assistant Commissioner accordingly.

Respondent’s contention:- The Department filed a Special Leave to Appeal against the order of CEGAT, which was dismissed by Hon’ble Supreme Court vide order dated 6-12-2004 (S.L.P. Civil CC 947/2004) [2005 (183) E.L.T. A118 (S.C.)].

Reasoning of Judgment:- After hearing the submissions and perusing the records, the High Court has ordered that “The refund claim has been submitted much prior to 1-3-1997, they are entitled for the same. Accordingly, we set aside the impugned order and allow the appeal with consequential relief.”

The Customs, Excise & Gold (Control) Appellate Tribunal has by its short order dated 8-9-2004, allowed interest on refund claim at the rate applicable from the expiry of three months from the date of filing application, till the date of payment. The order of the Tribunal is quoted hereunder:-

“This is an application for implementation of Tribunal’s Final Order No. A/248/03 NB-C dated 14-5-2003, by which the appeal of the assessee was allowed. We have considered the rival submissions and perused the contents of the application. We find that SLP filed by the Revenue against Tribunal’s Final Order was dismissed, after condoning delay in February, 2004. The assessee entered into protracted correspondence with the Department and till date the order has not been implemented. We, therefore, allow the prayer in the application by directing the Department to sanction refund of the amount together with the interest at the rate applicable from the expiry of three months after the date of filing application of refund till the date of payment and report compliance to the Tribunal within 6 weeks. To come up for ascertaining compliance on 2nd November 2004.”

Section 11BB of the Central Excise Act 1944, provides for interest on delayed refunds. Section 11BB is quoted hereunder :-

“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 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 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, 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.”

The interest on delayed refunds under Section 11BB on the duty ordered to be refunded under sub-section (2) of Section 11B is to be paid at such rate not below 5% and not exceeding 30% per annum, as is for the time being fixed by the Central Government, 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. The Explanation to Section 11BB is applicable, where the order of refund is made by the Commissioner (Appeals), the Appellate Tribunal, National Tax Tribunal or any Court, against the order of the Asstt. Commissioner of Central Excise, under sub-section (2) of Section 11B. The explanation further clarifies that the order passed by the Commissioner (Appeals), Appellate Tribunal or as the case may be, by the Court shall be deemed to be the order passed under the said sub-section (2) for the purposes of Section 11BB.

In the present case, the application for refund due to the admission is alleged to be filed after issuance of the Notification No. 6 of 1997-C.E. (N.T.) dated 1-3-1997. The CEGAT by its order dated 14-5-2003, held that the refund claimed has been submitted much prior to 1-3-1997, and thus the appellant is entitled to the same. The Supreme Court did not interfere with the order. The appellant was thus entitled to refund from the expiry of three months after the date of making application. We do not find that the Tribunal has committed any error in interpreting the provisions of Section 11BB of the Act, and allowed interest on refund, three months after the date of filing application of refund. In this case the entitlement to refund was prior to 1-3-1997 and not after any order passed by the Commissioner (Appeals), Appellate Tribunal or any Court. The question is answered against the Central Excise Department, and in favour of the assessee. Thus the Central Excise Appeal is accordingly dismissed.

Decision:- Appeal dismissed.

Comment:- The analogy that is drawn from this case is that the provisions of the notification no. 6/97 cannot be made applicable to the refund claim filed before the introduction of the said notification and the refund claim for the prior period cannot be rejected on implementation of the said notification.

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