By TIOL News Service

ERNAKULAM, MAR 04, 2019: THE Commissioner(A) had passed the following order –

"I remand back to the adjudicating authority officer as per Section 85(4) of Finance Act, for the limited purpose of verification of quantum of rebate sanctioned to the appellant. The appellant is directed to produce documents to establish that the Cenvat credit was utilised for payment of service tax on service exported. Interest will also be paid in accordance with law. I direct the adjudicating authority to pass an order within 3 months from the receipt of this order."

Later, after three months, a corrigendum was issued, allegedly in exercise of powers conferred by section 74 of the Finance Act, 1994, deleting the sentence "Interest will also be paid in accordance with law".

The CESTAT set aside this corrigendum.

Therefore, Revenue is in appeal before the Kerala High Court.

The High Court extracted section 74 of the Finance Act, 1994 and observed that the corrigendum was incompetent insofar as the provisions were concerned.

Inasmuch as -

+ The deletion of the interest granted cannot be deemed to be a mistake apparent from the record. It was a considered decision entered into by the First Appellate Authority and the interest payable would be in accordance with law i.e., the statute.

+ There is, in fact, no correction or rectification of a mistake, especially since the grant of interest on a refund is a statutory consequence.

+ Further, it is to be noticed that the corrigendum issued has the effect of reducing the amounts of refund, insofar as the interest liability is concerned and then necessarily there should have been a notice issued.

As regards the submission of the Revenue counsel that there is no reduction of the quantum of refund and it is only the interest liability which is being modified by the order, the High Court added –

++ The interest liability, as noticed, is a necessary consequence arising from the statute, specifically Section 11BB of the Central Excise Act, which cannot be restricted by a statutory authority.

++ Even if the specific direction for grant of interest was not there in the order, the assessee would be entitled to the claim under Section 11BB from the date of refund application as has been held in Ranbaxy Laboratories Ltd. v. Union of India - 2011-TIOL-105-SC-CX.

++ It is also to be noticed that the revenue never challenged the original order, wherein eligibility of refund was found and interest was granted, as a necessary statutory consequence.

Concluding that the corrigendum was issued in excess of the power conferred under Section 74 and, therefore, the Tribunal order was legal and proper, the Revenue appeals were rejected.

(See 2019-TIOL-508-HC-KERALA-ST)