By TIOL News Service

NEW DELHI, APR 16, 2014: THE appellant Hero Motors Ltd. are engaged in manufacture of two wheeler motor vehicle and parts thereof. The appellant 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 manufacture has not exported the final products under claim of Drawback or under claim for input duty rebate Notification No. 5/06- 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 of delay.

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 of 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.

The 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.

The 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.

The Tribunal held that the order of the Commissioner (Appeals) rejecting two appeals on limitation was not correct.

Coming to issue on merits, the Tribunal observed,

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. The refund under Rule 5 of the Cenvat Credit Rules, 2004 is 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.

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 that there is no estoppel in law against an assessee in taxation matters.

Besides this, the Apex Court in case of Union of India Vs. Madhumilan Syntex Ltd . reported in 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 . 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.

(See 2014-TIOL-574-CESTAT-DEL)