Mere Pendency Of An Appeal Would Not Detract From The Excise Duty Refund Demand: Delhi High Court

The Delhi High Court has held that the mere pendency of an appeal or an order of stay that may operate would not detract from the obligation of any person claiming a refund to make an application within the period prescribed and computed with reference to the "relevant date".

"We do so observe in light of the indubitable principle that an order of stay that may operate in an appeal does not efface the demand or the obligation of refund that may have sprung into existence. It merely places the enforcement of the order appealed against in abeyance. The order of stay would, in any case, be deemed to have never existed once the appeal comes to be dismissed," the bench of Justice Yashwant Varma and Justice Dharmesh Sharma said.

The petitioners stated that the interest is liable to run from the date when the refund is determined and would not be dependent on any application or other positive step being taken by an assessee.

The Central Excise Department asserted that, in light of the plain language of Section 11B read along with Section 11BB of the 1944 Act, the moving of an application is a prerequisite for computation of the date from which interest would be payable on a refund.

The Additional Commissioner confirmed the duty demand under Section 11A and held the petitioners liable to pay the duty along with interest in accordance with Section 11AB. The directions were framed for the confiscation of cash and the imposition of monetary penalties. The amount that had been deposited by the petitioners during the pendency of the SCN proceedings was also appropriated against the demands that had crystallised.

The petitioner preferred an appeal. That appeal was allowed in toto by the Appellate Authority in terms of its judgement. The Department preferred an appeal against that decision before the Customs, Excise, and Service Tax Appellate Tribunal, which ultimately came to be dismissed. Admittedly, while an interim order operated on that appeal, it was discharged once the appeal was dismissed by the CESTAT.

The assessee contended that once the original order had come to be set aside in appeal, they were obliged to refund the amounts that had been collected from the petitioner during the course of the investigation and the proceedings that were initiated. The obligation of the respondents to effect that refund could not be hinged on or made dependent upon an application being made by the petitioner, and since the action was merely consequential, it should have been initiated by the respondents of their own volition.

The respondent contended that, in terms of Section 11BB, interest is liable to be paid only if the refund is not affected within a period of three months from the date of receipt of an application made in accordance with Section 11B(1). The liability to pay interest on a refund would arise only if the same were effected three months after the making of an application for the same by the assessee.

The court noted that the subject of interest on delayed refunds, which is governed by Section 11BB itself, prescribes the starting point for payment of interest on delayed refunds to be the date when an application under Section 11B(1) is received.

The court, on a conjoint reading of Sections 11B and 11BB of the 1944 Act, concluded that interest on delayed refunds is clearly dependent upon the making of a formal application as stipulated by Section 11B of the Central Excise Act, 1944.

Case Title: M/S Goldy Engineering Works Versus Commissioner Of Central Excise

Citation: 2023 LiveLaw (Del) 606

Date: 14/07/2023

Counsel For Petitioner: Abhas Mishra and Kartikeya Matta

Counsel For Respondent: Anushree Narain, Mayank Srivastava

Click Here To Read The Order