By TIOL News Service

MUMBAI, FEB 24, 2017: IN the matter concerning valuation issue, the manufacturer filed two refund claims for the period from 1 st January 1978 to 31st October 1981 and for the period from 1 st November 1981 to 31st October 1984 for a total amount of Rs.1,25,34,988.97. The claim was rejected by the original authority and in writ petition before the High Court the order was set aside following which the amount was paid on 12th July 1990. On Revenue appeal, a Division Bench of the High Court, by its order of 3rd March 1993, found in favour of Revenue, in the light of amendment to section 11B of CEA, 1944, and directed the manufacturer to deposit the amount with the court and which, on 11th August 1993, was permitted to be withdrawn by department which, after disposal of writ petition filed by the appellant against such withdrawal, was effected on 13th October 1993. The special leave petition of the manufacturer against the rejection of refund claim by High Court was also dismissed by the Supreme Court on 30th January 1997.

Be that as it may, in the light of the judgment in Mafatlal Industries Ltd - 2002-TIOL-54-SC-CX and the revised section 11B of CEA, 1944, appellant filed a claim for refund on 11th February 1997 and which resulted in the original authority sanctioning the amount but transferring the same to the Consumer Welfare Fund; the claim of interest u/s 11BB of the CEA, 1944 made by the appellant purportedly for the period from the date of withdrawal of amount from High Court till the order of the original authority was also dismissed.

The Commissioner(A) held that the original authority had erred in transferring the amount to the Fund as the Supreme Court had ruled that there was no entitlement to sanction of refund itself and that the order of the original authority was void ab initio . Taking note that an appeal against a void order is not appropriate for claiming a right, the appeal was dismissed.

The appellant is now before the CESTAT.

The Bench, after considering the intricacies involved, inter alia observed thus –

++ Appellant could not have any grievance as their eligibility for refund had been decided against them by the Hon'ble Supreme Court. Had the impugned order set aside the order of the original authority on the ground that transfer to Fund was not proper the propriety of such setting aside could have been questioned. We observe that the first appellate authority has not done so but, while dismissing the appeal of M/s Allied Photographic Ltd, it was held that the order, being of itself flawed, cannot confer a right of interest on the applicant for refund. The reasoning adopted is certainly within the scope of decision on appeal . However, it does not suffer from any infirmity even though the decision may be challenged. Consequently, we do not concur with appellant that the impugned order deserves to be set aside for the alleged solecism.

In the matter of seeking interest u/s 11BB of the CEA, 1944, the Bench had the following to say –

++ The original authority, for reasons best known to him, has found it necessary to pass an order in a show cause notice which already stood decided. Whether the notice, limited to the issue of unjust enrichment, could settle the issue of limitation is not relevant; the highest court in the land has held the claim to be ineligible and that ineligibility cannot be transformed into eligibility by the Assistant Commissioner. The conclusion is that such an order does not reinstate the claims of the appellant to be an eligible claim for refund. That has been extinguished by the Hon'ble Supreme Court and, short of divinity,there is no executive power that can administer the 'kiss of life.' Without such reinstatement, the appellant ceases to be the 'applicant' that it claims to be in the grounds of appeal. It is only an applicant that is endowed with the right to claim interest.

The CESTAT, thereafter, extracted the provisions of section 11BB of CEA, 1944 and noted –

+ (section11BB) is unambiguously clear in that it is liable to be invoked only when three months have passed since it has been applied for. However, it is further contingent upon sanction of refund. Hence, …conditions are to be fulfilled for section 11BB to come into effect; sanction of refund to applicant and refund order not having been passed for three months since its application. While the last condition may be said to exist, it must also be made clear that such a state cannot be said to be in existence except where the refund is sanctioned to applicant. By no stretch can the appellant claim that the amount has been ordered to be refunded to it. The entitlement to interest, therefore, does not devolve on the appellant.

+ Even if it assumed that the transfer to the Fund was correct, it is moot whether any interest liability will devolve on the Central Government for any delay in doing so. That it took more than eight years for an order of transfer to Fund should not concern the appellant. A tax collected without authority of law retains its sanctity until illegality of collection is decided upon by lawfully constituted authority and brought to fruition by sanction of the amount. Without an order of sanction and disposition, thereof, to the Fund, the amount remains in the Consolidated Fund of India and the only consequence of sanction is its shift to the Fund which is also under the control of the Central Government. Appellant has no vicarious standing to act on behalf of the Fund and for claiming that, as the Fund is not entitled to interest, the Central Government has to be deprived of such amount . The appellant is not entitled to refund and, with that, its claim on time value of that money does not exist .

The appeal was held to be without merits and, therefore, dismissed.

(See 2017-TIOL-588-CESTAT-MUM)