By TIOL News Service

ALLAHABAD, MAY 09, 2014: A search was conducted at the premises of the petitioner on 12.8.1998.

By coercive method being adopted against the petitioner, a sum of Rs.20 lakhs had been deposited on 12.8.1998.

By the order dated 6.12.2000, the adjudicating authority had raised a demand of Rs.21 lakhs and had adjusted the aforesaid amount of Rs.21 lakhs.

Against the said order, the petitioner filed an appeal before the Tribunal. The Tribunal vide order dated 15.5.2002 set aside the demand order of the adjudicating authority.

Consequently, the petitioner moved an application for the refund of the amount on 8.7.2002, which has been allowed and in pursuance thereof, the amount had been refunded on 11.3.2003.

However, the interest under Section 11BB of the CE Act had not been paid for the delayed refund.

So, the petitioner filed an application for the payment of interest, but the same was rejected vide order dated 11.6.2003.

Against the said order, the petitioner filed an appeal before the Commissioner (A) but the same was dismissed vide order dated 11.11.2003.

In the second round of proceedings before the CESTAT, the petitioner again came out as a winner.

The Tribunal allowed the appeal with the following observation:

"It is well settled that in case of delayed payment of pre-deposit amount by the Department, the assessee is entitled to the interest thereon in accordance with law under Section 11BB. The perusal of the said section leaves no doubt that the assessee is entitled to interest if the payment had not been paid to him within 3 months of the finalisation of the claim. In this context reference may also be made to the ratio of law laid down in Jindal Electric & Machinery Corporation vs. Commissioner of Central Excise Ludhiana 2004 (166) ELT 276. Therefore, the petitioners who had been denied the refund of pre-deposit amount without any justification are entitled to interest thereon @ as prescribed under the law, after 3 months from the date of the refund application moved by the petitioners. Therefore, the impugned order of the Commissioner (Appeals) denying the interest is set aside. The petitioners are allowed interest @ prescribed under the law after 3 months from the date of the filing of the refund application, till the date of payment."

By the present Writ Petition, the petitioner has challenged this order dated 5.7.2004.

The petitioner has also submitted that against this order of the Tribunal, the Revenue filed an appeal before the Supreme Court, which has been dismissed on 25.10.2007 along with other connected Civil Appeals with the following observations:

"The point in dispute in the present appeals is as to whether the pre-deposit made as a condition precedent for the hearing of the appeals under the Central Excise Act, 1944 was, on the assessee being ultimately successful, refundable to the assessee with interest. The said point is concluded by a judgment of this Court in the case of Commissioner of Central Excise, Hyderabad v. I.T.C. Ltd. decided on 02nd December, 2004   -   2004-TIOL-112-SC-CX-LB . Moreover, subsequent to the said judgment, the Central Board of Excise & Customs has also issued a circular bearing No. 802/35/2004-CX dated 08th December, 2004 allowing payment of interest on delayed refund of amount of pre-deposit. In view of what has been stated above, these appeals are dismissed leaving the parties to bear their own costs."

In the above backdrop, the petitioner submits that in the case of   Commissioner of Central Excise, Hyderabad vs. I.T.C. Ltd. 2004-TIOL-112-SC-CX-LB,  the Supreme Court has directed for payment of interest @ 12%. He further submitted that the petitioner is also entitled for the interest for the period 12.8.1998 till 6.12.2000 when the adjudication order has been passed inasmuch as the said amount has been illegally retained without any legal demand against the petitioner.

The High Court observed that there is no substance in the claim of the petitioner for interest on the amount of Rs.20 lakhs for the period 12.08.1998 to 06.12.2000 inasmuch as no such claim was made before the lower authorities and the same could not be entertained now.

In the matter of claim for payment of interest @12%, the High Court observed -

"7. So far as rate of interest @ 12% is concerned, the Tribunal, in its order dated 5.7.2004, has observed that the petitioners are allowed interest at the rate prescribed under the law after three months from the date of filing of the refund application. The interest @ 12% has been provided by Hon'ble Supreme Court, there is no reason that the petitioner may not get interest @ 12%. No direction in regard is necessary to be issued."

The writ petition was dismissed.

In passing : Vide notification 17/2002-CE(NT) dated 13.05.2002, t he Central Government had fixed the rate of interest at eight per cent per annum for the purposes of the section 11BB of the CEA, 1944. This notification was superseded by notification 67/2003-CE(NT) dated 12.09.2003 and which fixed the rate of interest at six percent per annum for the purpose of the said section.

(See 2014-TIOL-677-HC-ALL-CX)