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M/S U.P. Twiga Fiber Glass Limited v. Union Of India & Others - WRIT TAX No. 16 of 2006  RD-AH 3177 (26 February 2007)
Civil Misc. Writ Petition No. 16 of 2006
M/s U.P. Twiga Fiber Glass Limited vs. Union of India and others.
Hon'ble R.K.Agrawal, J.
Hon'ble Vikram Nath, J.
(Delivered by R.K.Agrawal,J.)
By means of the present writ petition filed under Article 226 of the Constitution of India the petitioner, M/s U.P. Twiga Fiber Glass Limited, seeks the following reliefs:
"(i) issue a writ order or direction in the nature of mandamus and direct the respondent no.2 to forthwith pay interest to the petitioner on the delayed payment of refund to it Rs. 73,18,337/- from 26.8.95 at the rates applicable under the Act.
(ii) Award cost of this petition to the petitioner.
(iii) Pass such other and further writ, order or direction in favour of the petitioner as this Hon'ble Court may deem fit and proper in the circumstances of the case."
Briefly stated the facts giving rise to the present writ petition are as follows:
The petitioner is a Public Limited Company duly incorporated under the provisions of the Companies Act, 1956. It has engaged in the business of manufacture and sales of articles of glass fiber and glass wool. According to it these articles fall under Chapter 70 of the Schedule of the Central Excise Tariff Act, 1985. Disputes arose between the petitioner and respondent no.2 regarding classification and valuation of articles/goods manufactured by it. In respect of first dispute, according to the petitioner, the Assistant Collector, Central Excise, Division III, Ghaziabad vide order passed on 14th May, 1992 had held that a sum of Rs. 7110431/- became refundable to the petitioner. The second dispute was settled by the Commissioner (Appeals) Central Excise, Ghaziabad vide order dated 29th May, 1992 wherein a sum of Rs. 41396.32 was fund to be refundable to the petitioner. The third dispute was settled by the Assistant Collector, Central Excise Division IV, Ghaziabad vide order dated 21st September, 1990 wherein a sum of Rs. 238668.88 was found to be refundable to the petitioner. Pursuant to the orders passed by the authorities the petitioner filed three separate applications seeking refund of the respective amounts. The first application seeking refund of Rs. 7110431/- was filed on 6th November, 1992 whereas the second application seeking refund of Rs. 41396.32 was filed on 18th December, 1992 and the third application seeking refund of Rs. 238668.88 was filed on 26th February, 1991 before the Assistant Collector, Central Excise Division IV, Ghaziabad. All the amounts as claimed by the petitioner have been refunded on 14th November, 2005. However, interest on the amount of refund had not been granted. The petitioner is claiming interest on the amount of refund in view of the provisions of Section 11BB of the Central Excise Act, 1944 (hereinafter referred to as the Act).
In the counter affidavit filed by Manish Saxena, Deputy Commissioner Central Excise Division IV, Noida on behalf of the respondents it has been stated that the dispute regarding refund was not finally settled as claimed by the petitioner because the refund claim was rejected by the Assistant Commissioner, Central Excise Division IV, Ghaziabad vide order dated 24th September, 1996 whereafter the matter was taken up in appeal before the higher authorities and was finally settled by the Apex Court vide order dated 21st February, 2005. Thereafter, the petitioner filed three fresh refund claims on 5th March, 2005 which have been allowed vide order dated 14th November, 2005 and refund was also made. The liability for payment of interest in terms of Explanation to Section 11BB of the Act arises only after the dispute is finally settled and as the refund has been made within the stipulated period, there is no liability for payment of interest.
In the rejoinder affidavit filed by the petitioner, it has been stated that the refund claim which has been paid vide order dated 14th November, 2005 had arisen consequent upon the finalization of three disputes on classification and valuation. The disputes had already been settled by the year 1992 and the claim of refund was rejected only on the ground of unjust enrichment, which had already been disapproved by the Apex Court. As the petitioner has been denied the amount of refund for a very long period for no fault of it, it is entitled for interest in terms of Section 11BB of the Act.
We have heard Sri S.V.Arya, learned counsel for the petitioner and Dr. A.K.Nigam, learned Additional Solicitor General on behalf of the respondents.
Sri Arya, learned counsel submitted that the dispute regarding classification and valuation had been settled by the year 1992 wherein the authorities have directed for the refund of the excess amount paid by the petitioner. The claims of refund made by the petitioner on 26.2.91, 16.11.92 and 18.12.92 were illegally rejected by the Central Excise Authorities on the plea of unjust enrichment. The Apex Court vide order dated 21.2.2005 had held that the question of unjust enrichment does not arise in the case of provisional assessment. According to him the withholding of refund on an erroneous view taken by the respondents, cannot be said to be justified or correct and, therefore, interest is payable in terms of Section 11BB of the Act with effect from 26th August, 1995 at the applicable rate. He further claimed that the amount of interest has been illegally withheld and the petitioner has been deprived of use of its own money for a considerable period. The respondents are liable to compensate the petitioner by making payment of interest over the amount of interest from 14th November, 2005 till it is paid. In support of various pleas raised herein, he has relied upon the following decisions:
1. Hamdard (Wakf) Laboratories vs. Union of India 2005(188) E.L.T. 476 (Alld.)
2. J.K. Cement Works vs. Asstt. Commissioner of Central Excise and Customs 2004(170) E.L.T. 4 (Raj.)
3. Order dated 21st February, 2005 passed by the Apex Court in Special Leave to Appeal (Civil) No. 21547 of 2004 against the decision of the Rajasthan High Court in the case of J.K. Cement Works.
4. Sandvik Asia Ltd. vs. Commissioner of Income Tax-I Pune, 2006 (196) E.L.T. 257 (SC).
On the other hand, the learned Additional Solicitor General submitted that the claim of refund made by the petitioner had been rejected by the Central Excise Authorities on the ground of unjust enrichment and ultimately the Apex Court vide order dated 21st February, 2005 had finally settled the matter by holding that the question of unjust enrichment does not arise in the case of provisional finalization of the classification list. The claims became admissible only after the decision of the Apex Court and the petitioner thereafter filed fresh refund claims on 5th March, 2005 which have been processed by the authorities seeking information and asking for supporting evidences and after considering the same refund has been made on 14th November, 2005, thus, the refund has not been withheld wrongfully or intentionally and, therefore, there is no question of payment of interest. According to him the provision of Section 11BB of the Act is not attracted in the facts and circumstances of the case.
At the outset we may mention here that even though the petitioner had enclosed a copy of the order dated 14th November, 2005 passed by the Deputy Commissioner, Central Excise, Division V, Noida- respondent no.2 as Annexure 3 to the writ petition wherein the respondent no.2 while sanctioning refund had declined to grant interest, the petitioner for reasons best known has not sought quashing of the said order. We would have declined to go into the merit of the case on the short ground alone but looking the nature of the claim made by the petitioner we have proceeded to decide the issue on merits.
We have given our anxious consideration to the various pleas raised by the learned counsel for the parties. It is not in dispute that all the disputes, which are three in number, giving rise to the claim of refund regarding classification and valuation of articles/goods manufactured or cleared by the petitioner have been settled by the authorities on 21.9.1990, 14.5.1992, 29.5.1992. The authorities have found that a sum of Rs. 238668.88, 7110431.00 and 41396.32 respectively is refundable to the petitioner. The petitioner had filed claims for refund on 26.2.91, 6.11.92 and 18.12.92 in respect of the aforesaid amount. The claims of the refund were rejected by the authorities on 24.9.96, 10.10.96 and 31.3.97. A series of litigation took place between the parties and ultimately the Apex Court vide order dated 21st February, 2005 had set aside the orders rejecting the claims of refund on the ground of unjust enrichment by following the decision in the case of Commissioner of Central Excise, Mumbai-II vs. Allied Photographics India Ltd. 2004(166) E.L.T. 3; wherein it had held that the question of unjust enrichment does not arise in the case of refund consequent upon finalization of provisional assessment under Rule 9B of the Central Excise Rules, 1944.
The petitioner vide letter dated 5th March, 2005 had requested the Assistant Commissioner, Central Excise Division-V, Noida to make payment of the claims made on 6th November, 1992, 26th February, 1991 and 18th December, 1992. The contents of the said letter are reproduced below:
The Assistant Commissioner
Sub: Payment of refund claims of Rs. 71.10 lacs dated 6.11.92, Rs. 2.38 lacs dated 26.2.91 & Rs. 0.41 lacs dated 18.12.92.
We request you to make payment of the aforesaid claims which has not been made despite our several letters.
We enclose herewith Xerox of the Certified copy of the order dated 21.02.05 of the Hon'ble Supreme Court passed in the Civil Appeal No. 1325 of 2004.
For U.P.TWIGA FIBERGLASS LTC.
DY GENERAL MANAGER (C&A)"
Thus the claim of refund which was made by the petitioner vide letter dated 5th March, 2005 referred to the claims already made in the years 1991 and 1992. It was not a fresh claim of refund but a reminder of the earlier claims of refund. The Deputy Commissioner, Central Excise, Division-V, Noida while sanctioning the claims of refund has declined to grant interest on the following grounds:
" I have gone through facts and figures of all cases and also in the light of Hon'ble Supreme Court decision, the refund claims of the party are admissible as they are consequential refunds. The question of interest does not arise as claimed by the party. The refund claims in question pertain to period of years 1990 to 1992 and at that time there is no provision for payment of interest under Central Excise Act, 1944. Section 11B (interest on delayed refund) has been inserted by the Finance Act, 1955 (22 of 1995) w.e.f. 26.5.1995. Further it is pertinent to mention here the liability to pay interest arises only when dispute has been finally settled as per decision of Tribunal in the case of "Birla Corporation Ltd. Vs. CCE-2002, 144 ELT 674 (Tri) and Calcutta Jute Manufacturing Company vs. Commercial Tax Officer in 1997 (93) ELT 657 (SC)."
In the case of Hamdard (Wakf) Laboratories (supra) this Court while considering the provisions of Section 11BB of the Act has held as follows:
"From a bare reading of the provisions of Section 11-BB of the Act, we find that the legislature by the aforesaid provision has cast a duty upon the adjudicating authority to decide the claim for refund immediately within three months failing which the liability for interest start running after excluding the period of three months from the date of the application. Admittedly, in the present case, it is not in dispute that the claim for refund was made on 25th August, 1999 whereas the order for refund has been passed on 16th November, 2000. Under the provision of Section 11-BB of the Act, interest start running after three months from the date of the application irrespective of the fact as to whether the order for refund has been made subsequent to the period of three months. As in the present case, the order for refund has been made on 16th November, 2000 i.e. much after the expiry of period of three months from the date of making the application, therefore, the respondents are liable to pay interest at the specified rate therein. Liability for payment of interest is statutory and, therefore, it was the bounden duty of the Assistant Commissioner of Central Excise, Division-I, Ghaziabad to also pay interest from 26th November, 1999 to 15th November, 2000 at the rate specified under section 11-BB of the Act."
In the case of J.K. Cement Works (supra) the Rajasthan High Court has held as follows:
"21. The perusal of Section 11B goes to show that it prescribed a period within which the amount of refund can be claimed by the applicant. It also prescribes three months from the date of application as the period within which such refund is to be paid. Consequence of not paying refund within three months of making such application under Section 11B is that the Revenue becomes liable to pay interest on amount of refund with effect from the expiry of three months from the date of application until date of actual payment. The liability to pay interest is not tagged with decision to pay interest but in case it is ultimately found to be payable liability is with effect from expiry of three months of the date of receipt of application required to be made under Section 11B(`1). The rate of interest is to be prescribed by the Board and the interest is payable with effect from the date commencing from the expiry of three months from the date of receipt of such application till the refund of such duty.
22. The proviso to Section 11BB also takes care of the cases where refund became due prior to the insertion of proviso but the refund has not been paid until the insertion of Section 11B. In such event the date with effect from which liability to pay interest runs is with effect from the date of the expiry of three months from the date of the receipt of the assent of the President to the Finance Bill 1995, as the provision in the Bill became Act on 26.5.95. If the amount of refund claim was pending at the date of commencing of the new provisions and were not to be paid by 25.8.95, the Revenue became liable to pay interest w.e.f. 26.8.95 until the date of actual payment."
The Apex Court vide order dated 29th October, 2004 had dismissed the special leave petition against the aforesaid judgment of the Rajasthan High Court. From the aforesaid decision it is absolutely clear that the department is liable to pay interest at the specific rate under Section 11BB of the Act if the refund has not been made within three months from the date of the making of the application and if the application has been made prior to coming into force the Section 11BB of the Act then after three months from the date when the Finance Bill, 1995 by which Section 11BB of the Act was inserted had received the assent of the President. It may be mentioned here that the Finance Bill received the assent of the President on 26th May, 1995 and, therefore, if the refund has not been made by 25th August, 1995 where the application has been made prior to the insertion of Section 11BB in the Act interest starts running from that date i.e. 26th August, 1995 till it is actually paid.
In the case of Sandvik Asia Ltd. (supra) the Apex Court has held that that if the revenue takes erroneous view of the law, that cannot mean that the withholding of monies is justifiable or not wrongful. There is no exception to the principle laid down for an allegedly justifiable withholding. The exception made by the respondents for not making refund was only on the ground of unjust enrichment. The Apex Court in the case of the petitioner in the proceeding for refund had held that the question of unjust enrichment in the instant case does not arise. It is to be remembered that the Apex Court only declares law and the declaration would be treated as law of land, therefore, withholding of refund by the respondents on erroneous view cannot be said to be justifiable. The respondents have, therefore, exposed themselves to the liability of payment of interest in terms of Section 11BB of the Act.
So far as the question of claiming interest on the amount of interest is concerned, we may mention here that there is no pleading in this behalf in the writ petition and only at the time of hearing the learned counsel for the petitioner has advanced such a plea. We cannot permit such a plea for the first time of hearing of the writ petition when there is no factual foundation in the petition.
In view of the aforesaid discussions, the writ petition succeeds and is allowed with costs, which we assess at Rs. 1000/-. The respondent no.2 is directed to pay interest at the applicable rates under Section 11BB of the Act on the sum of Rs. 7038272/- (the principal amount which has already been refunded to the petitioner) from 26th August, 1995 till 14th November 2005 within 30 days from the date of filing of the certified copy of this order before the said respondent.
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