High Court · 2007

IN THE HIGH COURT OF JUDICATURE AT MADRASDated : 27.09.2007C O R A M :The Honourable Mr.Justice K.RAVIRAJA PANDIANandThe Honourable Mrs.Justice CHITRA VENKATARAMANC.M.A. Nos.1928 & 1929 of 2007 and M.P. No.1 of 2007Commissioner of Central Excise,1, Foulk's Compound,Anaimedu, Salem-636 001... Appellant in both the C.M.A.Vs1. M/s. Rajalakshmi Textile Processors (P) Ltd., Erode... 1st Respondent in C.M.A. No.1928/072. M/s. S.S.M.Processing Mills Ltd., Komarapalayam... 1st Respondent in C.M.A. No.1929/073. Customs, Excise and Service Tax Appellate Tribunal, South Zonal Bench, Shastri Bhavan, Haddows Road, Chennai – 600 006... 2nd Respondent in both the C.M.A.Civil Miscellaneous Appeals filed against the impugned FinalOrder Nos.993 & 994 of 2005 dated 11.07.2005 on the file of theCustoms, Excise And Service Tax Appellate Tribunal, South ZonalBench, Chennai. For Appellant : Mr.V.T.Gopalan Additional Solicitor General of India for Mr.R.Ramanlal Sr. C.C.G.C O M M O N J U D G M E N T(Judgment of the Court was delivered by K.RAVIRAJA PANDIAN,J)These appeals are filed against the final orders 993 & 994 of https://hcservices.ecourts.gov.in/hcservices/ 2005 dated 11.07.2005 passed by the Customs, Excise and Service TaxAppellate Tribunal, South Zonal Bench, Chennai. 2. The facts in nutshell are as follows:The respondents M/s.Rajalakshmi Textile Processors (P) Ltd., Erodeand M/s.S.S.M.Processing Mills Ltd., Komarapalayam are engaged in theprocessing of cotton fabrics and man made fabrics falling under CETH52 and 55 of schedule of CETA, 1985 and cleared the same on paymentof duty under Bond. The assessees have obtained fabrics fromoutsiders for carrying out several processing work on job work basisand were availing deemed credit in respect of the inputs in terms ofRule 11 of erstwhile Cenvat Credit Rules, 2001 read with NotificationNo.53/2001 CE(NT) dated 29.06.2001 and Notification No.6/2002 CE(NT)dated 01.03.2002 at specified rates and utilised the credit forpayment of duty on the clearances of the processed fabrics for homeconsumption. The credit so earned by the assessee in respect ofinput could not be utilised fully for payment of duty on homeclearances, which has resulted in accumulation of credit in thecredit account. The assessees have filed refund claims of unutilisedcredit on 28.03.2003 & 22.03.2002 respectively with the lowerauthority and the same was sanctioned only on 01.12.2003 and02.12.2003 respectively, after expiry of three months from the dateof filing of refund claims. Consequent to the sanctioning of theabove said refund claims, the assessees have filed another refundclaim for Rs.73,855/- on 14.01.2004 and 7,98,197/- on 18.12.2003respectively with the Lower Authority, claiming the interest forbelated refund of the claims. The Lower Authority on adjudicatingthe claims of interest rejected the same by order dated 27.2.2004 and25.2.2004 respectively. Aggrieved by that, the assessees have filedappeals before the Lower Appellant Authority. The appeals weredismissed by orders dated 9.7.2004 and 12.7.2004. The assesseesfiled further appeal to the second respondent, CESTAT, Chennai. TheTribunal by reason of the impugned orders, set aside the orders ofthe lower authorities and allowed the appeals. Being aggrieved bythat order, the appellant-Department have filed the above appeals.3. The question of law formulated for entertainment of the aboveappeals is as follows:"Whether the Hon'ble CESTAT, South ZonalBench, Chennai is correct in allowing theinterest on the refunded amount of input dutycredit for the period of delay beyond the periodof three months prescribed under sub-section 1of section 11BB since the unutilized portion ofdeemed credit is governed only by the provisionsof specific law viz. Rule 5 of Cenvat CreditRules, 2001/2002 and this specific provision of https://hcservices.ecourts.gov.in/hcservices/ law govern with self-contained procedure setoutunder Notification No.11/2002CE(NT) dt.1.3.2002 ?"4. We heard the argument of the learned Additional SolicitorGeneral of India. 5. Section 11B(2)(c) and 11BB of the Central Excise Actprovides as follows:11B. Claim for refund of duty(1)..........(2) If, on receipt of any application, the AssistantCommissioner of Central Excise or Deputy Commissionerof Central Excise is satisfied that the whole or anypart of the duty of excise paid by the applicant isrefundable, he may make an order accordingly and theamount so determined shall be credited to the Fund:Provided that the amount of duty of excise asdetermined by the Assistant Commissioner of CentralExcise or Deputy Commissioner of Central Excise underthe foregoing provisions of this sub-section shall,instead of being credited to the Fund, be paid to theapplicant, if such amount is relatable to-(a).....(b)......(c) Refund of credit of duty paid on excisable goodsused as inputs in accordance with the rules made, orany notification issued, under this Act."Section 11BB.Interest on delayed refunds.- If any dutyordered to be refunded under sub-section (2) of section 11Bto any applicant is not refunded within three months fromthe date of receipt of application under sub-section (1) ofthat section, there shall be paid to that applicantinterest at such rate, not below five per cent and notexceeding thirty per cent. Per annum as is for the timebeing fixed by the Central Government, by notification inthe Official Gazette on such duty from the date immediatelyafter the expiry of three months from the date of receiptof such application till the date of refund of such duty;Provided where any duty ordered to be refunded undersub-section (2) of section 11-B in respect of anapplication under sub-section (1) of that section madebefore the date on which the Finance Bill, 1995 receivesthe assent of the President, is not refunded within threemonths from such date, there shall be paid to the applicantinterest under this section from the date immediately afterthree months from such date, till the date of refund ofsuch duty." https://hcservices.ecourts.gov.in/hcservices/

6. On the reading of the provisions, we are of the view that theapproach of the Tribunal is correct. Under Modvat credit scheme, dutypaid on inputs was allowed to be taken as credit for duty payable onclearance of the final products. The credit taken was nothing but forpayment of duty. Thus, Modvat credit is a credit taken on payment ofduty which credit could be utilised for the duty payable on the endproduct. Therefore, the Modvat credit is nothing but the creditavailable to the assessee on the assessee paying the duty on inputsat the time of clearance of final goods. Hence, credit could beregarded as excise duty available with the assessee for dischargingits obligation of payment of duty on final goods. As per Section11BB, if the refund of duty is not paid within the time stipulatedtherein, there is a statutory obligation on the part of theDepartment for payment of interest for the belated refund of theduty. As per the statutory provision, the respondent is entitled forinterest for belated refund of the duty credit. 7. Further, it is an admitted case of the parties that therefund has been ordered under sub-section 2 of Section 11B videclause (c) of the proviso to sub-section (c) of Section 11-B. TheBoard has also clarified that the provisions of Section 11BB ofCentral Excise Act are automatically attracted for any refundsanctioned beyond a period of three months. Section 11BB isapplicable to any duty ordered to be refunded in sub-section 2 ofSection 11-B.8. Having regard to the statutory provisions, learned AdditionalSolicitor General appearing for the appellant has also not veryseriously pressed the point. Hence, we find no reason to interferewith the orders passed by the Tribunal, which are impugned in theseappeals. Therefore, the civil miscellaneous appeals are dismissed.Consequently, the connected M.P. is closed. No costs.Sd/Asst.Registrar/true copy/Sub Asst.Registrar Kk/usk https://hcservices.ecourts.gov.in/hcservices/ To1. The Customs, Excise & Service Tax Appellate Tribunal, South Zonal Bench Shastri Bhawan Annexe 1 Floor, 26, Hadddows Road Chennai 6.2. Commissioner of Central Excise, 1, Foulk's Compound, Anaimedu, Salem-636 001.+1cc to Mr.R.Ramanlaal,Advocate Sr 60929TS (CO)km/26.10.C.M.A. Nos.1928 & 1929 of 2007and M.P.No.1 of 2007