By TIOL News Service

MUMBAI, JUNE 12, 2017: THE appellants were engaged in the manufacture of HDPE/PP Woven Sacks [CSH3923.90], Kraft Lined Bags and HDPE Fabric laminated with Kraft Paper & LDPE both falling under [CSH5909.00] and the classification of the said products were approved by the department since 1991. Later,in the year 1995, the department changed the classification of Kraft Lined Bags and HDPE Fabric laminated with Kraft Paper & LDPE under sub-heading 3923.90 with effective rate of 30%.

The appellants were served with SCNs demanding the differential duty from 1.4.1994 to 6.2.1995. The total demand was Rs.1,09,05,003/- was confirmed by the AA and upheld by the Commissioner(A).

The Tribunal ordered the appellant to make a pre-deposit of Rs.20 lakhs for obtaining stay. Vide final order dated 20.05.2005, the CESTAT held that such bags would fall under 63.01 and the matter was remitted back to the adjudicating authority to re-determine the demand only, if any.

The AA failed to pass an order on remand for almost five years and, therefore, the appellant sought a refund (on 19.05.2010 and with a further letter dt. 16.7.2010 ) of the pre-deposit made by them, along with interest.

Hurriedly, the AA passed an order that there is no demand to be recovered on account of differential duty. As for the refund claim, the same was also sanctioned on 18.10.2010 but without any mention of interest. Both the lower authorities contended that the interest is payable from 3 months of the date of filing of refund application and since the refund was granted within 3 months from the filing of refund application, no interest is payable.

The Commissioner (A) upheld this order and, therefore, the appellant is before the CESTAT.

The appellant while emphasizing their entitlement for interest submitted that the adjudicating authority was supposed to grant the refund of pre-deposit immediately after 3 months from the date of the Tribunal's order but for no rhyme or reason the AA sat on the Tribunal's order for 5 years.

The Bench observed –

"4. ... It is settled law that in case of pre-deposit the refund of the pre-deposit arises and the same is payable within 3 months from the date of order of the Tribunal. The pre-deposit of Rs. 20 lakhs was made due to stay order passed by the Tribunal only for pending appeals. The movement appeal is disposed of, this amount of pre-deposit stand refundable to the assessee. In case of refund of pre-deposit the assessee is not required to file refund application particularly for the reason that the refund automatically arises and when the Tribunal passes the final order. As regard the delay in passing the order on remand by the Tribunal, the adjudicating authority should have passed the order within 3 months from the date of the Tribunal's order which he failed to do so. From the record, it clearly appears that there was no reason for the adjudicating authority to keep the de novo adjudication pending for 5 years. The Tribunal has clearly ordered that the classification of goods shall be under heading 63.01 and further matter was remanded only to determine the differential duty, if any, arises. As per the adjudicating authority's order on remand, no differential duty arise that means after deciding the matter by the Tribunal no duty was payable by the appellant. Therefore the entire amount of pre-deposit of Rs.20 lakhs was refundable to the appellant within 3 months from the date of Tribunal's order. As regard the contention of both the lower authorities that the refund was sanctioned within 3 months from the date of application of refund, I am of the view that in case of refund of pre-deposit since no written application is required. The application filed by the appellant cannot be taken a tool to deprive of the appellant from the legitimate claim of interest. It is settled in various decisions of this Tribunal that incase of pre-deposit the refund is consequential to the order of the appellate authority, therefore the filing of a formal refund application that too when the adjudicating authority has not acted on the order of the Tribunal, cannot be reason for denying the interest to the appellant…."

Concluding that this view is supported by the decisions in Sainson Paper Industries Ltd - 2016-TIOL-244-CESTAT-DEL and Ispat Traders - 2011-TIOL-34-CESTAT-AHM, the CESTAT directed the lower authorities to grant interest for the period from 20.8.2005 to 17.10.2010 as per the rate prescribed under the law.

The impugned order was set aside and the appeal was allowed.

(See 2017-TIOL-1974-CESTAT-MUM)