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SCA/7257/2011 9/ 9 ORDER
IN
THE HIGH COURT OF GUJARAT AT AHMEDABAD
SPECIAL
CIVIL APPLICATION No. 7257 of 2011
With
SPECIAL
CIVIL APPLICATION No. 7258 of
2011
=========================================================
WELSPUN
TRADING LIMITED - Petitioner(s)
Versus
UNION
OF INDIA THROUGH SECRETARY & 2 - Respondent(s)
=========================================================
Appearance
:
MR
HARDIK P MODH for
Petitioner(s) : 1,
NOTICE SERVED BY DS for Respondent(s) : 1,
3,
MR YN RAVANI for Respondent(s) :
2,
=========================================================
CORAM
:
HONOURABLE
MR.JUSTICE AKIL KURESHI
and
HONOURABLE
MS JUSTICE SONIA GOKANI
Date
: 29/09/2011
ORAL
ORDER
(Per
: HONOURABLE MR.JUSTICE AKIL KURESHI)
These petitions arise in similar
factual background. They have therefore, been heard together and are
being disposed of by this common judgement. Facts as arising in
Special Civil Application No.7257/2011 may be noted.
The petitioners are merchant
exporters. For the exports made by the petitioners they had lodged
rebate claims with the Central Excise authorities on 9.7.2007 and
thereafter. Such rebate claims were neither granted nor rejected by
the authorities. It appears that the authorities held the belief
that by virtue of a circular dated 8.12.2006, the petitioners were
not entitled to such rebate.
One of the petitioners in these
petitions had approached this Court by filing writ petition
challenging such circular dated 8.12.2006. It is not in dispute that
this Court in decision in case of Welspun Gujarat Stahl Rohren
Ltd. v. Union of India reported in 2010(254) ELT 551(Guj.) held
that such circular cannot take away the vested right of the
exporters to claim rebate for exports made between 8.12.2006 till
17.9.2007. It is not in dispute that the rebate claim of the present
petitioners were covered by the said decision of this Court. It is
also not in dispute that decision of this Court in case of Welspun
Gujarat Stahl Rohren Ltd. was challenged before the Apex Court
and the appeal of the department was dismissed by judgement in case
of Union of India v. Welspun Gujarat Stahl Rohren Ltd.
reported in 2010 (256) ELT A161(SC). Decision of Apex Court was
rendered on 23.7.2010.
After the decision of Apex Court,
the adjudicating authority on the basis of decision of this Court in
case of Welspun Gujarat Stahl Rohren Ltd.(supra),
allowed the rebate claims of the petitioners by various orders
passed in September, October and November 2010. While granting
rebate as claimed by the petitioners however, the adjudicating
authority did not grant any interest on such rebate claims. The
petitioners therefore vide communication dated 17.1.2011 prayed that
interest be granted on such rebate claims. Since there was no
response to this communication, the petitioners sent yet another
communication dated 1.4.2011 and reiterated their request for
interest. In response to such communication, the Deputy Commissioner
of Central Excise on 31.5.2011 wrote as under :
“Please
refer to your application dated 17.01.2011 and 01.04.2011, claiming
interest of total Rs.8,07,41,671/- on the amount of rebate
sanctioned by this office vide Rebate (Refund) Orders No.480/10-11
dated 30.09.2010, 485/10-11 dated 07.10.10, 509/10-11 dated 11.10.10
and 560/10-11 dated 04.11.10.
02 In
this regard your attention is drawn to the provisions of Section 11B
and 11BB of the Central Excise Act, 1944 according to which interest
on delayed refunds are to be given to the applicants if the refunds
are not sanctioned within the stipulated time limit.
03. In
the present cases, the refund(rebate) became payable only after the
judgment of the Hon’ble Supreme Court, dated 23.07.2010. As per
above mentioned provisions, no interest is payable as all the Rebate
Claims are disposed off within the prescribed time limit mentioned
in Section 11A read with Section 11AB of the Central Excise Act,
1944.
04. In
view of above, your application for sanction of interest on the
rebate claims, mentioned hereinabove merits rejection as all the
above mentioned Rebate Claims have been sanctioned in conformity
with the provisions of Section11B of the Central Excise Act, 1944.”
The petitioners are therefore,
before this Court questioning the stand of the respondents in
denying the claim of interest on the delayed payment of rebate.
While issuing notice on 16.6.2011,
we had made following observations :
“Counsel
for the petitioner submitted that the petitioner was granted rebate
pursuant to the judgment of this Court in case of Welspun Gujarat
Stahl Rohren Limited vs. Union of India, reported in 2010 (254)
ELT 551 (Guj). However, the claim of interest on such delayed refund
was turned down on the ground that such refund was paid within
three months of the judgment of the Hon’ble Supreme Court,
upholding the decision of the High Court. He submitted that the stand
of the Department is contrary to several decisions of this Court, in
particular, he relied on the judgment in the case of Afrique
Tradelinks Private Limited v. Union of India dated 3rd
February 2004, reported in 2004 (2) GLR 667.
Issue
notice returnable on 14th July 2011. Direct service is
permitted.”
At the outset, learned counsel for
the petitioners submitted that after this Court issued notice in
these petitions, the petitioners to safeguard themselves against any
lapse of period of limitation before the Commissioner(Appeals),
filed appeals against the impugned orders. He however, submitted
that the petitioners would be withdrawing such appeals and that such
appeals were filed only by way of abundant caution to keep the right
of appeal alive.
We have heard learned counsel for
the parties for final disposal of the petitions.
Counsel for the petitioners
submitted that the stand of the authority is wholly erroneous. He
submitted that rebate claims were not sanctioned within three months
from the date of filing such claim. In terms of Section 11BB of the
Central Excise Act, therefore, the petitioners were entitled to
interest upon completion of such period of three months. He relied
on several judgements of this Court as well as Bombay High Court in
this regard. In particular, our attention was drawn to the decision
of revisional authority dated 24.12.2010, copy of which is produced
at Annexure-C to the petitions, wherein while granting the rebate
claims of the revisional petitioner therein, the authority also
after examining various judgements granted such rebate with
interest.
On the other hand, learned counsel
Shri Ravani submitted that when the rebate claims were lodged,
circular of the department did not permit such claims to be
sanctioned. He submitted that only when the law was settled by the
Apex Court in case of Union of India v. Welspun Gujarat
Stahl Rohren Ltd.(supra) by
its order dated 23.7.2010, that the department undertook steps to
sanction rebate claim. This was done within three months of the date
of the Supreme Court’s order. No interest was therefore, required to
be paid. He relied on decision of Division Bench of this Court in
case of Padmanabh Silk Mills v. Union of India
reported in 2006(193) ELT 536(Guj.).
From
the facts on record it clearly emerges that rebate claims of the
petitioners were neither granted nor rejected by the authority for a
long period of time. If the authority was of the opinion that by
virtue of a particular circular such claim was not sustainable, the
rebate claim could as well have been rejected. Such rejection would
have given the petitioners at-least right to challenge such
decision. This was admittedly not done. In the meantime, the
offending circular dated 8.12.2006 was challenged by one of the
petitioners before Gujarat High Court. Gujarat High in case of
Welspun Gujarat Stahl Rohren Ltd.(supra)
held and observed as under :
“24.
By inserting Clause (h) in the Notification No.19/2004-CE(NT) dated
6.9.2004, an attempt was made to give retrospective effect to the
Notification No.37/2007-CE(NT) dated 17.9.2007. However, there is
nothing in this Notification to apply it retrospectively and even
otherwise, it is not legally permissible.
xxxx
xxxx
27.
Based on this amendment, it was strongly urged before the Court
that the application and/or operation of the provisions of Rule-18
of Central Excise Rules, 2002 has been restricted only upto a period
enumerated in Col.No.3 of Sixth Schedule, i.e. 1st
day
of March, 2002 to 7th
day of December, 2006. Despite this amendment brought in by
Section-88 of the Finance Act, 2008, the right vested in the
petitioner No.1 Company to claim rebate in respect of export of
goods after 8.12.2006 until 17.9.2007 continued and its validity or
enforceability could not be affected.”
The Apex
Court upon an appeal by the Department upheld the decision of
Gujarat High Court. It was only thereafter that rebate claims of the
petitioners were sanctioned. When the Gujarat High Court declared
that the circular would not affect the claim of rebate for exports
made during a certain period, it would have effect right from the
inception i.e. from the date of issuance of circular. Contention of
the counsel for Revenue that the petitioners became entitled to
rebate only when the High Court rendered the judgement and from the
date when the Apex Court confirmed the decision of Gujarat High
Court, cannot be accepted. The judgement of the High Court only
declared a certain legal position. Supreme Court upheld such
decision. In terms of Section 11BB of the Central Excise Act, the
petitioners were entitled to interest on the delayed payment of
rebate after period of three months of filing of such claims.
Section 11BB
of the Central Excise Act reads as under :
“Section
11BB: Interest on delayed refunds.- If any duty ordered to be
refunded under sub-section (2) of section 11B to any applicant is
not refunded within three months from the date of receipt of
application under sub-section (1) of that section, there shall be
paid to that applicant interest at such rate, [not below five
percent] and not exceeding thirty per cent per annum as is for the
time being fixed [by the Central Government, by Notification in the
Official Gazette], on such duty from the date immediately after the
expiry of three months from the date of receipt of such application
till the date of refund of such duty:
Provided
that where any duty ordered to be refunded under sub-section (2) of
section 11B in respect of an application under sub-section (1) of
that section made before the date on which the Finance Bill,1995
receives the assent of the President, is not refunded within three
months from such date, there shall be paid to the applicant interest
under this section from the date immediately after three months from
such date, till the date of refund of such duty.
Explanation.-
where any order of refund is made by the Commissioner (Appeals),
Appellate Tribunal [National Tax Tribunal] or any court against an
order of the [Assistant Commissioner of Central Excise or Deputy
Commissioner of Central Excise], under sub-section (2) of section
11B, 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 subsection (2) for the purposes of
this section.]”
Counsel for the
respondents would rely on the explanation to section 11BB to contend
that question of interest would arise only after three months of the
judgement of the Supreme Court. To our mind such contention is also
not tenable. In the present case order of refund (in form of rebate
claim) was not made by the High Court or any Appellate authority but
by the Assistant Commissioner as the original adjudicating
authority.
Decision
of this Court in case of Arique Tradelinks Pvt. Ltd &
anr. v. Union of India & anr.
reported in 2004(2) GLR 1587 is along similar lines of-course in
background of provisions contained in Sections 27 and 27A of the
Customs Tariff Act. Division Bench observed as under :
“9. While
the submission of Mr Shah, learned additional standing
counsel for the Central Government will have a bearing in so
far as the question of implementation of the final order is
concerned, that is,if the order of the Assistant/Deputy
Commissioner is varied by the order of the Commissioner (Appeals), it
is the order of the appellate authority which is required to be
given effect to. The Section, however, does not provide that
the interest would be paid from the date of the order of the
appellate authority. Section 27A clearly provides that
interest is to be paid to the applicant on the duty in
question from the date immediately after the expiry of three
months from the date of receipt of such application (for refund)
till the date of refund of such duty. There is no dispute
about the fact that the petitioners had made the original
application for refund of excess customs duty (65% less 45%) on
31.10.1995 and, therefore, the petitioners have claimed interest
for the period from 31.1.1996 onwards. Even in respect of the
petitioners’ claim for interest for delayed payment of refund
amount of Rs.14,83,303/-, the respondent authorities have paid
the petitioners interest for the period from 31.1.1996 till the
date of payment of the said refund amount which worked out to
Rs.9,56,729/- and which was paid to the petitioners on 12.7.2000.
There is no reason for the respondent authorities to
justifiably refuse payment of interest for the delay in payment
of refund amount of Rs.5,21,099/- which was ultimately
sanctioned by the Commissioner (Appeals) by his order dated
26.2.2001 and actually paid to the petitioners on 30.6.2001.
11. In
the facts of the instant case, while the Deputy Commissioner
had determined the refund amount of Rs.14,83,303/-, the appellate
authority allowed the additional refund amount of Rs.5,21,099/-
and, therefore, there is no justification for denying the
petitioners interest for the delay in payment of the said amount
of Rs.5,21,099/- for the period from the date of expiry of
three months from 31.10.1995 when the petitioners had made
the application for refund of the entire amount of Rs.20,72,023/-
out of which Rs.14,83,303/- was directed to be refunded by the
Deputy Commissioner’s order dated 6.6.2000 and the balance amount
of Rs.5,21,099/- was ordered to be refunded by the Appellate
Commissioner’s order dated 26.2.2001.
12. In view of the above discussion, the petition is allowed. The respondents are directed to pay the petitioners interest at the rates applicable in accordance with the notifications issued under Section 27A of the Customs Act, 1962, on the amount of Rs.5,21,099/- for the period from the date of expiry of three months from the date on which the petitioners made the refund application till the date of payment of refund of the said amount i.e. for the period from 31.1.1996 till 30.6.2001. The amount of interest shall be calculated within one month from the date of receipt of the writ of this Court and the actual payment of interest so calculated shall be made within one month thereafter i.e. within two months from the date of receipt of the writ of this Court.”
We
may also notice that Bombay High Court in case of Shroff United
Chemicals Ltd. v. Union of India and others reported in
2011-TIOL-411-HC-MUM-ST dated 6.6.2011 had an occasion to examine
the claim of interest for delayed refund under Section 11BB of the
Central Excise Act. Bombay High Court set aside the order of the
Appellate Commissioner refusing interest making following
observations :
8.
We are not impressed with the submission that the Petitioners
should be relegated to pursuing a remedy of an appeal against the
order of the Deputy Commissioner insofar as it declines the claim
for interest. As a matter of fact, the Commissioner (Appeals) while
remanding the proceedings had by an order dated 15 October 2010
directed the adjudicating authority to decide the refund claim
“along with interest under Section 11 BB”. Section 11 BB
postulates that if any duty ordered to be refunded under sub section
(2) of Section 11 B to any applicant is not refunded within three
months from the date of receipt of the application under sub section
(1) of that section, the applicant shall be paid interest at the
rate stipulated on such duty from the date immediately after the
expiry of three months from the date of receipt of the application
till the date of refund of such duty. The entitlement of the
applicant, once the requisite conditions have been fulfilled follows
as a matter of law and is a mandate of the statute. The record
before the Court makes it clear that the application that was
submitted by the Petitioners was together with the relevant
documentary evidence. The finding of the adjudicating authority that
the Petitioners had not submitted relevant documentary evidence has
been reversed by the Commissioner (Appeals) and it has been found to
be erroneous. As a matter of fact the Petitioners had together with
the refund application enclosed a certificate of the Chartered
Accountant and had thereafter by a letter dated 8 November 2006 also
annexed a copy of the Balancesheet as of 31 March 2006. Having
regard these admitted facts, upon which there is no dispute, the
reasons which weighed with the Deputy Commissioner in declining to
grant interest are specious. The adjudicating authority has noted
that the Petitioners submitted the documents on 22 October 2010;
attended a personal hearing on 14 March 2011, during the course of
which relevant documents to decide the refund claim were submitted.
The fact that the Petitioners submitted relevant documents once
again at the personal hearing upon remand does not detract from the
fact that all the necessary documents were already submitted by the
Petitioners in the first place before the adjudicating authority
much prior to the order of remand. In that view of the matter, the
adjudicating authority had no justification whatsoever in declining
to allow the claim of interest which has a statutory character.”
We
may also notice that in another decision in case of Swaraj
Mazda Limited v. Union of India
reported in 2009(235)ELT 788(Bom.), following observations were made
:
“8.
Perusal of the above provision shows that if any duty recovered
is found to be refundable still the payment is not made within a
period of three months from the receipt of application for refund
then interest is liable to be paid. Perusal of the above provision
makes it clear that liability to pay interest arises on expiry of
period of three months “from the date of receipt of
application under sub-section (1) of Section 11B.” We have
already referred to above as to how application under section 11B is
to be made, therefore, unless a finding is recorded that the
application that was filed by the petitioner under Section 11B
cannot be termed as an application made under section 11B, liability
to pay interest after expiry of period of three months from the date
of receipt of that application cannot be denied. Firstly there is no
such finding recorded in the order impugned and secondly on close
examination of the order of the appellate authority dated 30.7.1999
we find that it cannot be said that the application filed by the
petitioner for refund was found to be so incomplete that it would
not be termed as an application at all. The revisional authority in
the order impugned has observed that the appellate authority found
that a certificate from the authority was found necessary for
establishing correlation by the appellate authority. Perusal of the
order of the appellate authority does not show that production of
the certificate was necessary for establishing correlation.
Correlation was to be established by looking at the chassis number
in the duty paying document executed at the time of payment of duty
on the chassis with engine and the chassis number mentioned in the
duty paying document executed at the time of payment of duty on the
bus. The documents evidencing payment of duty at both the occasions
were already available on record because it is only on the basis of
those two documents that the Assistant Commissioner had recorded
finding that the duty has been paid on both the occasions. It is,
thus, clear that the correlation could be established only on the
basis of those two documents which were on record. A certificate was
required to be submitted by the appellate authority only to
reinforce the fact that the duties have been paid at both the
places. We thus find that the finding recorded in the order impugned
that the applications for refund made by the petitioner were
incomplete on the date of which they were received, is not
sustainable and is contrary to the record and, therefore, is liable
to be set aside.”
We notice that decision of Bombay
High Court in case of Swaraj Mazda Limited(supra)
was carried further in appeal. Apex Court however,
dismissed the appeal in case of Union of India v. Swaraj
Mazda Limited reported in
2010(253) ELT A19(SC).
In
view of such catena of decisions on the issue, we have no hesitation
in holding that authority erred in not granting rebate to the
petitioners with interest in terms of Section 11BB of the Act.
As
already noted the revisional authority also under similar
circumstances had allowed the rebate claim with interest of the
revisional petitioner therein. In decision of this Court in case of
Padmanabh Silk Mills(supra),
Division Bench had proceeded on footing that petitioner therein had
made claim of interest on delayed refund under Section 11B of the
Act. Judgement was rendered in different factual background.
Considering
the facts and circumstances of the case, both the petitions are
allowed. The petitioners’ claim of interest on rebate beyond the
period of three months from the date of applications is granted.
Adjudicating Authority shall calculate the interest expeditiously
and preferably within two months from the date of receipt of a copy
of this order.
We
record the statement of the petitioner that appeals before the
Appellate Commissioner shall be withdrawn.
Petitions
are disposed of accordingly.
(Akil
Kureshi,J.)
(Ms.
Sonia Gokani,J.)
(raghu)
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