Delhi High Court: In a case wherein two writ petitions raised the common question of the date from which interest was leviable on an asserted delay in disbursal of refund under the Central Excise Act, 1944 (‘Act’), the Division Bench of Yashwant Varma* and Dharmesh Sharma, JJ., observed that the mere pendency of an appeal or an order of stay that might operate thereon would not detract from the obligation of any person claiming a refund making an application. The Court, after a conjoint reading of Sections 11-B and 11-BB of the Act, concluded that interest on delayed refund was clearly dependent upon the making of a formal application as stipulated by Section 11-B of the Act. The Court thus, disposed of the writ petition and held that interest if any, shall be liable to be computed and paid to the petitioners if it be found that the refund was effected beyond a period of three months when computed from the date when the respective applications were made and received.
Background
On 27-07-2006, a Show Cause Notice (‘notice’) was issued to the petitioner in respect of certain goods which had been seized. This notice was followed by another notice dated 29-01-2007 in terms of which the Department raised a demand for additional duty and proposed penal action against the noticees for having violated the provisions of an exemption notification. The petitioner asserted that during the pendency of those proceedings, it was also forced to deposit Rs. 20,00,000. The Additional Commissioner confirmed the duty demand of Rs. 45,31,574 under Section 11-A of the Act and held that the petitioners were liable to pay the same along with interest thereon in accordance with Section 11-AB of the Act. Aggrieved by the order, the petitioner preferred an appeal, which was allowed by the Appellate Authority in terms of its judgment dated 31-12-2008. The Department preferred an appeal against that decision before the Customs, Excise and Service Tax Appellate Tribunal (‘CESTAT’) which was dismissed on 27-09-2016. The petitioner thereafter filed an application for refund which had accrued in terms of the order passed by the Appellate Authority and consequent to the challenge thereto being negatived by CESTAT.
The petitioner alleged that the order of refund was never communicated to it and that despite repeated reminders, the respondents failed to apprise the petitioners of the status of its claim for refund constraining it to institute the present writ petition. The respondents submitted that the amounts were remitted to the petitioner’s account electronically and duly credited therein on 01-03-2017. The respondents further asserted that once the order of refund dated 23-02-2017 came to hold the field and was neither questioned nor assailed by the petitioner, it was not open to it to now claim any further interest on the same.
Analysis, Law, and Decision
The Court noted that the issue of refund and the interest payable in case of delay was governed by Sections 11-B and 11-BB of the Act, respectively. The Court further noted that Section 11-B(1) in clear and unambiguous terms contemplated the making of an application for refund being made by any person claiming refund of any duty of excise and interest paid on such duty and the claim of refund insofar as the petitioner was concerned arose in the backdrop of the order in original coming to be set aside in appeal. The Court further noted that the petitioners had made an application for refund ultimately and only after the departmental appeal before the CESTAT was dismissed.
The Court observed that the mere pendency of an appeal or an order of stay that might operate thereon would not detract from the obligation of any person claiming a refund making an application as contemplated under Section 11-B(1) within the period prescribed and computed with reference to the “relevant date”. The Court, considering indubitable principle observed, that an order of stay that might operate in an appeal did not efface the demand or the obligation of refund that might have sprung into existence. It merely placed the enforcement of the order appealed against in abeyance. The order of stay would, in any case, be deemed to have never existed once the appeal comes to be dismissed.
The Court noted that the subject of interest on delayed refund which was governed by Section 11-BB itself prescribed the starting point for payment of interest on delayed refunds to be the date when an application under Section 11-B(1) was received. The Court, after a conjoint reading of Sections 11-B and 11-BB of the Act, concluded that interest on delayed refund was clearly dependent upon the making of a formal application as stipulated by Section 11-B of the Act.
The Court agreed with the respondents’ contentions that a refund of duty and interest paid thereon was liable to be viewed as distinct from a pre-deposit that might be made in compliance with Section 35-F of the Act. The Court opined that the distinction between Sections 11-B and 35-FF was also evident from the language employed in Section 35-FF, which stipulated that interest would commence from the date when the amount deposited by the appellant under Section 35-F was required to be refunded consequent to an order passed by the Appellate Authority. Section 35-FF of the Act thus indicated that interest would commence from the date of the order of the Appellate Authority as distinct from the making of an application which was prescribed to be the starting point insofar as Section 11-BB of the Act was concerned.
The Court observed that a levy of interest on refund must undoubtedly follow where it was found that the amount had been unjustifiably retained or remitted with undue delay and the respondents could not be permitted to retain moneys which were otherwise not due or were otherwise liable to be returned.
The Court opined that in the present cases, the issue of refund was duly regulated by two statutory provisions whose prescriptions would necessarily have to be adhered to. However, the Court opined that it was unable to endorse the observation that a deposit of duty and a pre deposit were identical concepts. The Court also noted that a pre-deposit made as a condition of filing an appeal was in any case not considered to be “duty” even by the respondents.
Thus, the Court disposed of the writ petition and held that interest if any, shall be liable to be computed and paid to the petitioners if it be found that the refund was effected beyond a period of three months when computed from the date when the respective applications were made and received.
[Goldy Engineering Works v. Commissioner of Central Excise, 2023 SCC OnLine Del 4094, decided on 14-07-2023]
*Judgment authored by: Justice Yashwant Varma
Advocates who appeared in this case :
For the Petitioner: Abhas Mishra, Kartikeya Matta, Advocates;
For the Respondents: Anushree Narain, SC; Mayank Srivastava, Advocate.
