Whether appellate commissioner order sanctioning refund should be deemed to be order passed under Sub-Section (2) of Section 11B?

PJ/Case Laws/2012-13/1238

Case:- COMMISSIONER OF CENTRAL EXCISE & CUSTOMS, HYDERABAD VS M/S SHANTI AUTO (P)

Citation: - 2012-TIOL-1192-CESTAT-BANG

Brief fact: - The Respondent filed a claim for refund of duty of Rs.17,26,184/- on 26.03.1998. That claim was based on order-in-original No.16/97 dated 10.10.1997 passed by the Commissioner of Customs and Central Excise, Hyderabad, which was accepted by the department. The refund claim however came to be rejected by the original authority, against which an appeal was preferred by the aggrieved party to the Commissioner (Appeals), who allowed that appeal and directed the lower authority to grant refund. Ultimately the refund was effected partly on 27.09.2001 (Rs.5,89,856/-) and partly on 06.06.2003 (Rs.11,36,328/-). However no interest was disbursed.
Later on, on 16.07.2003, the respondent filed a claim for interest under Section 11BB of the Act, which also came to be rejected. Against the order of the original authority rejecting the claim for interest, the party preferred an appeal to the Commissioner (Appeals) and the latter passed the impugned order in favour of the party. The learned Commissioner (Appeals), in the impugned order, ordered payment of interest in terms of the explanation to Section 11BB ibid. The present appeal of the department is directed against the appellate Commissioner's order.

Appellant Contention: - The Appellant has relied on certain decisions which are to the effect that the relevant date for payment of interest under Section 11 BB is the date of expiry of three months from the date of Tribunal's order for payment of interest.

Respondent Contention:- The Respondent refers to the provisions of Section 11 BB and interprets the same in such a way that no interest is liable to be paid to the respondent.

Reasoning of Judgment: The Tribunal held that the refund was consequential to the Commissioner's order which was accepted by the department. The learned Commissioner (Appeals), in the impugned order, aptly refers to the explanation to Section 11BB which reads as under:
"Where any order of refund is made by the Commissioner (Appeals), Appellate Tribunal or any court against an order of the Assistant Commissioner of Customs or Deputy Commissioner of Customs under sub-section (2) of Section 1 18, 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."

As per the explanation, the Appellate Commissioner's order sanctioning refund should be deemed to be an order passed under sub-section (2) of Section 11B, which would mean that the date on which the original authority first rejected the refund claim (08.05.1998) should be deemed to be the date of grant of refund claim. This legal position which was overlooked by the original authority in the subsequent proceedings correctly understood by the learned Commissioner (Appeals) and accordingly interest was ordered to be paid. In the result, the order passed by the learned Commissioner (Appeals) for payment of interest under Section 11BB of the Act to the respondent on the amount of duty refunded to them is liable to be sustained. Accordingly interest is liable to be paid for the period from 26.06.1998 (the date immediately following the period of 3 month from 26.03.1998) to 26.09.2001 on the amount of RS 5,89,856/- which was refunded on 27.09.2001 and on the remaining amount of Rs 11,36,328/- which was refunded on 06.06.2003, interest has to be paid for the period from 26.06.1998 to 05.06.2003. Therefore Tribunal upholds the impugned order and expects the original authority to quantify the amount of interest and disburse the same to the respondent accordingly.

Decision:- The appeal of department is rejected.

Comments:- This is very good decision wherein the refund was rejected by adjudication officer and later on allowed on appeal. The interest is held to be payable after three months from the date of filing of original refund with the adjudication officer. This has been rightly done also. The logical conclusion also says that when the refund is rejected then it has to be paid from the date of filing of refund. This will another impact also that the department will not reject the claim on one pretext or the another. It will incur a interest cost to them.

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PJ/Case Laws/2012-13/1238

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