CX - Since duty is paid before finalization of provisional assessment, no interest is payable - amount which is not payable cannot be retained by Govt. without authority of law: CESTAT
By TIOL News Service
MUMBAI, APRIL 05, 2018: M/s. IMIL merged with the appellant company on 25.10.2005. Prior to merger and during the period from April 2003 to 25.10.2005, goods were supplied by IMIL to the Appellant on payment of duty on a provisionally declared value. On final determination of cost of production, M/s IMIL paid differential duty along with interest (under protest) amounting to Rs.3,03,81,370/-.
The order of final assessment was passed by the Assistant Commissioner on 28.12.2006.
The Appellant filed Refund claim on 20.04.2007 in respect of the interest paid by them.
The ground taken is that the differential duty was paid by them prior to the date of final assessment order whereas in terms of Rule 7(4) of CER, 2002 interest is not payable in case where differential duty is paid within one month of the date of order.
The claim was rejected by the original authority. The Commissioner(A) upheld this order. It was also held that the claim was covered u/s 11Bof CEA, 1944 and that the appellant had not followed the procedure for payment of duty Under Protest. Also, the Appellant were required to establish that they had not passed on the incidence of the amount for which the refund was claimed.
The appellant is before the Tribunal and inter alia submits that as per Rule 7(4) of CER, interest is payable only when the differential duty arises as a result of finalization of provisional assessment and if the same is not paid within one month of finalization; that no interest is payable where the differential duty is paid prior to the finalization of the provisional assessment. Reliance is placed upon the decisions in Ispat Industries Ltd - 2006-TIOL-1994-CESTAT-MUM, - 2010-TIOL-923-HC-MUM-CX which was further upheld by Apex Court; CEAT Ltd. - 2015-TIOL-397-HC-MUM-CX as affirmed by Supreme Court; Northern Minerals Ltd. - 2007-TIOL-601-HC-P&H-CX; CM Envirosystems Pvt. Ltd. - 2008-TIOL-2249-CESTAT-BANG & Final Order No. A/ 87152/17/SMB dated 05.04.2017 passed in their case.
The AR while reiterating the findings of the impugned order emphasized that all refunds are covered u/s 11B of CEA, 1944; that refund was filed on 20.04.2007 whereas date of payment of interest is 2004-2005, hence refund is time barred; that provisions of unjust enrichment are applicable.
After considering the submissions, the CESTAT observed –
Merits:
++ Appellants have paid interest in respect of duty paid before the finalization of the assessment. In case duty is paid before the finalisation of the assessment, interest is not chargeable as held by Hon'ble Bombay High Court in the case of CEAT Ltd. - 2015-TIOL-397-HC-MUM-CX and the same was affirmed by the Hon'ble Supreme Court …Therefore the amount of interest paid by the appellant is refundable to them.
++ Also, the appellant admittedly paid the amount as interest and if it is not payable, the same is refundable, even if not under Section 11B, otherwise also, as the said amount which is not payable cannot be retained by the Government without authority of law.
++ The contention of the lower authority that the refund of interest is not covered under section 11B is not sustainable in the light of the fact that as the interest was demanded in terms of Section 11AB, therefore, it cannot be excluded from the provisions of Section 11B as was held in case of CCE, Delhi III Vs. Northern Minerals Ltd. [ 2007-TIOL-601-HC-P&H-CX ].
++ Appellant vide their letter dt. 01.07.2004 had intimated the department that the interest shall be paid Under Protest. Also the Deputy Commissioner vide letter dt. 19.01.2005 asked the Appellants to pay interest pursuant to which the Appellant paid Interest. In such circumstances the payment of interest was clearly having been made Under Protest.
Limitation:
++ Refund has arisen only after finalization of assessment and before finalization of the assessment there was no ground for the Appellant to file refund as the same would have been held premature . The provisional assessment was finalized on 28.12.2006 and the instant claim was filed on 20.04.2007 which is well within the six months of the finalisation of the assessment, hence the claim cannot be considered to be time barred.
Unjust enrichment:
++ It is observed that the interest was paid by the appellant on their own and the same, not being the part of the price of the goods, question of passing of incidence of the same does not arise. Therefore, we are of the view that in the facts of the present case, the refund is not hit by unjust enrichment.
The impugned order was set aside and the appeal was allowed.
(See 2018-TIOL-1076-CESTAT-MUM)
