1. Appellant is in appeal against the impugned order wherein claim of interest has been rejected by the authorities below.
2. The brief fact of the case are that appellant are engaged in the manufacture of Polyester Staple Fibre (PSF) at its factory located at Barabanki. Till 25.07.1991, the appellant was operating under the set-off scheme, in terms of Notification No. 225/86 dated 03.04.1986, which provided that the duty paid on Mono Ethylene Glycol (input) would be set off against the duty payable on PSF (final product). After introduction of Modvat Scheme, the appellant had vide letter dated 19.12.1996 sought refund of the unutilized set-off duty to the tune of Rs. 80,73,405/- lying in its RG 23 Account, by way of transfer to its RG-23A (Modvat Account). The said refund was claimed by way of transfer in terms of Rule 57H(3) of the Central Excies Rules. Vide letter dated 21.06.2001 it was intimated to the appellant that transfer of credit would be considered at a later stage therefore set off amount would not be transferred to their Modvat account for utilization of payment of duty and remained lying with the department either for transfer or refund. Later on after settling the various disputes at various levels, the appellant was permitted t
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o transfer unutilized balance in three tranches vide letters dated 09.06.2006, 21.02.2011 and 02.08.2011, which were pursuant to the disputes relating to credit availed under the set off regime being decided by either this Tribunal or the Ld. Commissioner (Appeals). Although transfer was allowed, but payment of interest was not given for delay in permission to transfer the credit. The appellant requested for sanction of the interest on the said unutilized credit balance for the period of delay in grant of refund by way of transfer of credit. A show cause notice was issued to the appellant for rejection of their claim of interest and claim of interest was rejected on the ground that the transfer of credit under Rule 57H(3) was not an application for refund filed under section 11B of the Central Excise Act and thus no interest under section 11BB could be granted. Against the said order appellant is before us.
3. The Ld. Counsel for the appellant submits that the sole ground on which claim of interest has been denied that there is no specific provision for grant of interest in respect of refund being claimed by way of transfer of credit. The appellant relied on the decision of Hon'ble High Court of Madhya Pradesh in the case of Midland Plastics Ltd. v. Union of India : 2006 (205) ELT 12 (MP)], Ebiz.com Pvt. Ltd. v. CCE : 2017 (459) STR 389 (All) and Hindustan Coca-Cola Beverages Pvt. Ltd. v. UOI: 2015 (324) ELT 299 (Guj.)]. Therefore he prayed for impugned order be set aside and appeal be allowed with consequential relief.
4. On the other hand Ld. AR reiterated the findings of the impugned order and submits that the appellant was allowed transfer of credit of set off amount in their Modvat account and same has been coming out from the impugned order. Therefore no interest is payable to the appellant.
5. Heard both sides. Considered the submissions.
6. We find that in this case the sole ground for denial of interest on delayed refund/transfer of credit to Modvat account is that there is no such provision under the Rules to entertain the same under section 11B of the Act. It is an admitted fact that the refund by way of transfer was claimed by the appellant in terms of Rule 57H(3) of Central Excise Rules, 1994, which reads as under:-
(3) On an application from a manufacturer who had been immediately before filing of declaration under Rule 57G availing of,-
(a) the special procedure under Rule 56A in respect of materials or component parts for use in the manufacture of finished excisable goods, or
(b) an exemption for giving credit with respect to duty paid on the materials or component parts used in the manufacture of finished excisable goods,
the Collector may permit such manufacturer to transfer the credit of duty paid on the said materials or component parts received by such manufacturer and lying unutilized immediately before obtaining the dated acknowledgement of declaration made under Rule 57G in his account in RG 23 to his account in RG 23A.
Provided that the materials and component parts and the finished excisable goods have been specified as inputs and final products respectively in the notification issued under Rule 57A.
7. Admittedly the appellant is entitled to the refund of set off by way of transfer to Modvat credit account. Thus the core issue is that whether the provisions of section 11B and 11BB OF Central Excise Act, 1944 are applicable to the proceedings of claim of refund by way of transfer under Rule 57H(3) of Central Excise Rules, 1944 or not. We find that similar issue came up before Hon'ble High Court of Madhya Pradesh in the case of Midland Plastics Ltd. (supra) wherein the Hon'ble High Court has observed as under:-
11. It is the case of the respondents that in matters pertaining to grant of allowance of Modvat credit under Rule 57 there is no provision for grant of interest under the entire Central Excise Law and the provisions of Section 11BB cannot be made applicable in such matters. Accordingly, on these counts respondents have resisted the claim made by the petitioner.
15. Section 11BB of the Central Excise Act, 1944 with regard to interest on delayed payment was inserted by Section 75 of the Finance Act of 1995 with effect from 26-5-1995 and, therefore, with effect from the date three months subsequent thereof petitioner claims interest on the basis of notification issued by the Central Govt. in accordance with the aforesaid provision. This benefit is being resisted by the respondents on the ground that in a claim for Modvat credit made under Rule 57H the provisions of Section 11B and Section 11BB of the Central Excise Act will not apply. This question is considered by the Gujarat High Court in the case of Indo-Nippon (supra). That was a case where the assessee had made a contention that provisions of Section 11B and Section 11BB are not attracted to Modvat credit whereas it was the case of the department that the said provisions are applicable even to Modvat credit. After considering the provisions of sub-section (2) of Section 11B in Paras 28 and 29 of the aforesaid judgment a Division Bench of the Gujarat High Court has held that the language of clause C to the provisions of sub-section (2) is very clear and it has been held that the claim for refund based on Modvat credit is maintainable in accordance with the procedure and limitation prescribed in sub-section (1) of Section 11B of the Central Excise Act. This judgment of the Division Bench of the Gujarat High Court has been upheld by the Supreme Court and the S.L.P. filed by the department being S.L.P. (Civil) No. 658/02 has been dismissed by the Supreme Court on 26-8-2002. From a complete reading of the aforesaid judgment it is clear that it is held in the aforesaid judgment that the provisions of Rule 57H and the notification issued thereunder enable refund under the Modvat credit scheme but even in such cases the procedure and limitation for claiming such refund would be governed by the provisions of Section 11B of the Central Excise Act. That being so, the arguments advanced on behalf of the department to be contrary has to be rejected and it has to be held that with effect from the date the provisions of Section 11BB came into force petitioner was entitled to interest on the amount due in accordance with the notification issued by the department. Accordingly, with effect from 26-8-1995 till the date of settlement of the claim i.e. 28-6-2002 petitioner was entitled to interest at the rate notified by the Central Govt. in accordance with the provisions of Section 11BB of the Central Excise Act. To that extent relief claimed for by the petitioner has to be allowed.
8. As the Hon'ble High Court has held that the provisions of rule 57H and the Notification issued thereunder enable refund under Modvat credit scheme, but even in such cases the transfer of limitation for claiming such refund would be covered by the provisions of section 11B of the Act, therefore we hold that provisions of section 11B of the Central Excise Act are applicable to the facts of this case. Further we find that in the case of Hindustan Coca-Cola Beverages Pvt. Ltd. (supra), Hon'ble Gujarat High Court further observed as under:-
1.1 There was delay in allowing the transfer of respective Modvat/Cenvat credit from the date of application till the date for grant of such Modvat/Cenvat credit.
1.2 The petitioner was aggrieved by order dated 11-4-2005 passed by the Commissioner, whereby the claim of the petitioner, for interest on the ground that there was no provision empowering the department to pay interest on the Modvat/Cenvat claim withheld by the Department's inaction, was rejected.
5.3 This Court is of the considered opinion that the entire approach is wholly erroneous. Had the amount been paid as the Central Excise duty or Customs duty or admissible drawback amount, the department would have been willing to consider the claim for interest. But since the amount was withheld wholly without any justification, their stand is that no interest can be paid. The Court finds that on merger, the unutilized credit lying with the amalgamating company gets transferred to the amalgamated company automatically by virtue of Rules 57F(20) and 57S(5) of the Central Excise Rules, 1944. Therefore, it is not a case where the petitioner is to be granted refund by virtue of the order of an appellate authority but it is a case where an amount to which the petitioner was rightfully entitled under the provisions of law was retained without any rationale or reasoning acceptable in law. This Court is thus of the opinion that withholding the transfer of credit on merger was wholly unauthorized and unjustified because the same was done without any lawful consideration and in clear violation of the legal provisions. Since there was a failure on the part of the department in not initiating any proceedings within time limit, the amount to which the petitioner was rightfully entitled was denied to him. The only inescapable conclusion that we can reach is that the respondents had no reason to deny the transfer of the unutilized credit to the petitioner on merger. They had no authority to withhold such amount in law. In that view of the matter, it would be highly unjust to permit the respondents to hold on to the petitioner's money for nearly 5 years without any interest at all as it would amount to Revenue taking advantage of its own wrong of withholding the permission for transfer of credit.
5.4 The contention to the effect that no interest is payable because there is no provision of interest under the scheme of the Act is also thoroughly misconceived and misplaced. When the Department acts illegally and not as per the scheme of the Act, the interest on such refund can never be provided for under the Scheme of the Act. If the authorities act as per the law, the question of granting interest on refund can be appreciated and considered as per the scheme of the Act.
9. The said order of the Hon'ble High Court of Gujarat in the case of Hindustan Coca-Cola Beverages Pvt. Ltd. has been entertained by the Hon'ble jurisdictional High Court in the case of Ebiz.com Pvt. Ltd. (supra), wherein the Hon'ble High Court relying on the decision of the Hon'ble Gujarat High Court in the case of Hindustan Coca-Cola Beverages Pvt. Ltd. held that any amount received by the Revenue as deposit or pre-deposit i.e. unauthorizedly or under mistaken notion, etc., cannot be retained by Revenue since it has no authority in law to retain such amount and it must be refunded with interest. Therefore, following the precedent decisions of the Hon'ble High Court as discussed hereinabove we hold that refund of set off was not given by way of credit in the Modvat account and delay has been occurred on account of the Revenue. In that circumstances for intervening period, the appellant is entitled to claim interest from the date of filing of refund of set off by way of credit to the Modvat scheme after three years from the date of filing claim of refund of set off by way of transfer to Modvat Credit Scheme under RG-23A till its realisation. In view of the above, the impugned order is set aside and the appeal is allowed with consequential relief.
(Operative part of the order was pronounced in the open Court