ORDER
K.S. Dilipsinhji, Member (T)
1. The Collector of Central Excise, Baroda, has filed this appeal under Section 35B of the Central Excises and Salt Act, 1944, against the Order No. V-2(19)2290/82, dated 16-5-83 passed by the Collector of Central Excise (Appeals), Bombay, under which he allowed the first appeal of the Respondents for the refund of handloom cess and interest on the amount of duty on cotton yarn consumed in the manufacture of cotton fabrics used in the manufacture of cotton napkins which were ultimately exported out of India. In the appeal, the Collector of Central Excise, Baroda, has contended that in Section 3 of the Khadi and Other Handloom Industries Development (Additional Excise Duty on Cloth) Act, 1953, there is no provision for refund of duty. The proviso under the Section contemplates exemption from the levy of the handloom cess, but not the refund once the cess is collected. As regards the refund of the interest on the duty on the yarn used in the manufacture of fabrics which were further converted into napkins, the appeal states that the deferment of the levy of duty on the yarn is a concession to the assessee under Rule 49A. Since the collection of duty is deferred, the assessee has been made liable to pay interest on the amount of duty on the yarn. The appeal further contends that under Rule 12 of the Central Excise Rules, 1944 only the amount of Central Excise Duty can be refunded and not the amount of interest. In support of this averment, the Collector’s appeal relies on the advice of the Ministry of Law tendered to the Ministry of Finance and circulated by the Ministry under their letter F. No. 261/18A/3/79-CX-8, dated 24-2-82. A copy of the advice of the Ministry of Law is also reproduced in the Finance Ministry’s letter dated 24-2-82.
2. Appearing on behalf of the Collector, Shri Pattekar reiterated the aforesaid contentions. On behalf of the Respondents, I find that no one is present even though the notice for the hearing has been served and received by the Respondents. I, therefore, proceed to decide the Collector’s appeal on merits.
3. I have given the utmost consideration to the arguments advanced, by the Collector. So far as the refund of the handloom cess is concerned it has been argued that under the proviso to Section 3 there is exemption from collection of the cess on cloth which is used in the manufacture of goods which are exported out of India. But Section 3 does not provide for such refund. I am afraid this is an erroneous argument. Under Sub-section (2) of Section 3 the duty of excise specified in Sub-section (1) is in addition to the duty of excise chargeable on cloth under the Central Excises and Salt Act, 1944 and it is to be levied and collected in the same manner as the duty of excise on cloth levied and collected under the Act. Therefore it is Sub-section (2) of Section 3 which empowers the Asstt. Collector to levy and collect the handloom cess. In other words under these provisions the machinery provisions of the Central Excises and Salt Act, 1944 have been applied to the collection of the handloom cess which is described as additional duty on cloth. Therefore the refund of this duty popularly known as the handloom cess can be claimed as provided under Section 11B of the Central Excises and Salt Act, 1944; provided the same is refundable. It was been admitted in the Collector’s appeal that under the proviso to Section 3 the cess is not leviable in case of cloth which is used in the manufacture of goods which are exported out of India In the present case the requirements of the proviso are fully satisfied. The cloth on which the cess has been paid has been used in the manufacture of napkins which have been exported out of India. Hence under Section 3 of the Khadi and Other Handloom Industries Development (Additional Excise Duty on Cloth) Act, 1953, no duty is leviable. Therefore, in case such duty has already been paid and the repayment of the same is demanded, there is no justification to refuse the repayment, provided the claim is otherwise in order. In the present case of the claim for refund filed by M/s. Jayantilal Harakhchand & Co., Bombay, I find that their claim is in order and the Asstt. Collector has sanctioned the refund of basic excise duty, etc., under the same order by which he rejected part of the Appellants’ claim. It is thus seen that the claim for the refund of the handloom cess is in order and accordingly the same is admissible. To this extent the order of the Collector of Central Excise (Appeals), Bombay, is correct and I confirm the same.
4. So far as the Collector’s appeal against the refund of the interest on the amount of duty on cotton yarn used in the manufacture of. cloth and later in napkins is concerned, it is seen that this interest has been collected in terms of Rule 49A of the Central Excise Rules, 1944. The question, therefore, arises is whether the claim for the refund of the same was legally valid. Under Rule 12A the rebate of duty on goods manufactured and exported from India in respect of any material used in the manufacture of such goods is permissible provided, the Central Government allows such a rebate by issue of a Notification. It is no one’s case that Rule 12A does not apply to the napkins covered by the Collector’s appeal. But the Collector has relied on the advice of the Ministry of Law to the effect that under Rule 12 (Rule 12A being analogous to Rule 12) the rebate can be granted of the duty of excise. The duty of excise means duty as leviable under Section 3 and not the Rules. Since interest is not a duty for this purpose, the rebate of interest is not permissible. Thus, the Law Ministry’s advice relied on by the Collector deals with the relevant provisions and I am in complete agreement with this part of the advice tendered by the Ministry of Law. Since the refund of the interest is not covered by the rebate envisaged either under Rule 12 or Rule 12A, the refund of the amount of interest is not admissible. Section 11B permits refund of duty and under explanation (A) refund includes rebate. Hence the refund of excise duty is covered by Section 11B. But what is not covered is the amount of interest as this is not a duty of excise for the purpose of the Central Excises and Salt Act, 1944. In this behalf the definition of duty can pertinently be referred to as laid down under Rule 2(v) of the Central Excise Rules, 1944. Since the amount of interest levied under Rule 49A is not duty within the aforesaid definition, its refund under Rule 12A read with Section 11B is not permissible. Since the Collector of Central Excise (Appeals) in his order dated 6-5-83 has allowed this refund, the Collector’s order is not correct or proper to this extent. Accordingly, 1 set aside his order to this effect and restore the order of the Assistant Collector of Central Excise, Bulsar. Thus the appeal of the Collector of Central Excise, Baroda, partly succeeds.