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CX – Commissioner(A) unjustifiably equated refund consequent upon finalisation of provisional assessment with adjudication proceedings u/s 11B: CESTAT

2019-TIOL-2145-CESTAT-ALL

IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
REGIONAL BENCH, ALLAHABAD

Appeal Nos. E/442/2012-EX[DB], E/443/2012-EX[DB]
E/444/2012-EX[DB]

Arising out of Order-in-Appeal No.277-279/CE/APPL/NOIDA/11, Dated: 25.11.2011
Passed by Commissioner(Appeals), Customs and Central Excise, Noida

Date of Hearing: 28.03.2019
Date of Decision: 28.03.2019

M/s LG ELECTRONICS INDIA PVT LTD

Vs

COMMISSIONER OF CENTRAL EXCISE
NOIDA

Appellant Rep by: Shri Atul Gupta & Shri Ayush Agarwal, Advs.
Respondent Rep by: Shri Mohd. Altaf, AC (AR)

CORAM: Ajay Sharma, Member (J)
Sanjiv Srivastava, Member (T)

CX – The assessee-company is a major manufacturer of electronic items – It claimed refund of duty paid upon finalization of provisional assessment – On adjudication, partly allowed the refund claimed by the assessee – On appeal, the Commr.(A) sustained the order passed by the adjudicating authority, allowing the entire amount of refund claimed – However, the Commr.(A) disallowed the interest claimed by the assessee u/r 7(5) of the CER 2002 – Hence the assessee’s appeals.

Held: From a plain reading of Rule 7(5), it is evident that if any amounts are to be refunded as per the order of finalization of provisional assessment, the same must be refunded with interest from the first day of the month succeeding the month for which such refund is determined till the date of the refund at a rate which is as prescribed as per the Notfn issued u/s 11BB of the CEA 1944 – The grounds taken by the Commr.(A) are untenable because the adjudication proceedings are for finalization of provisional assessment, which is a separate realm governed by Rule 7 of the CER 2002 – This rule provides for determination of amounts due or refunded as well as for payment of interest – Hence the Commr.(A) unjustifiably equated such proceedings with denial of refund with the adjudication proceedings u/s 11B – When interest is by way of operation of law, it needs to be paid as per the provisions stated in law: CESTAT

Assessee’s appeals allowed

FINAL ORDER NOS. 70679-70681/2019

These three appeals are directed against Order-in-Appeal No.277-279/CE/APPL/NOIDA/11 dated 25.11.2011 passed by Commissioner(Appeals), Customs & Central Excise, Noida. By the said Order-in-Appeal Commissioner(Appeals) has upheld the order of Asstt. Commissioner granting refund of certain amounts at the time of finalization of the provisional assessments. In respect of the amounts denied by the adjudicating authority also he has allowed the refund claims. Thus in toto entire amount of refund claim at the time of finalization of the assessment has been allowed to the appellants. However, Commissioner (Appeals) while allowing the refund has not allowed the interest claimed by the appellants in terms of Rule 7(5) of the Central Excise Rules, 2002.

2. We have heard Shri Atul Gupta, learned Advocate for the appellant and Shri Mohd. Altaf, learned Asstt. Commissioner (A.R.) for the Revenue.

3. Arguing for the appellants learned Counsel took us through the provisions of Rule 7(5) of the Central Excise Rules, 2002, which reads as follows:-

“(5) Where the assessee is entitled to a refund consequent to order for final assessment under sub-rule (3), subject to sub-rule (6), there shall be paid an interest on such refund at the rate specified by the Central Government by notification issued under section 11BB of the Act from the first day of the month succeeding the month for which such refund is determined, till the date of refund.”

He submits that once the refund was allowed to them, interest should have flowed to them by way of operation of law as per the above Rule. Commissioner(Appeals) has given very filmsy ground stating “I find that once it is held by the adjudicating authority during quasi judicial proceedings that the amount cannot be refunded, the Section 11BB would not be applicable. Hence question of interest at this stage does not arise.” Accordingly he submits that their prayer to the extent of allowing interest in respect of the amount refunded should be allowed.

4. Arguing for the Revenue learned A.R. reiterated the order of the Commissioner(Appeals).

5. We have considered the submissions made during the course of hearing and in appeal. The short point for consideration is in respect of Rule 7(5) of the Central Excise Rules, 2002 reproduced above in para No.3.

6. From the plain reading above said Rule it is quite evident that if any amounts are to be refunded as per the order of finalization of provisional assessment, the same should be refunded along with interest from the first day of the month succeeding the month for which such refund is determined till the date of the refund at a rate which is as prescribed as per the Notification issued under Section 11BB of Central Excise Act, 1944. The ground taken by Commissioner(Appeals) cannot be justified because here the adjudication proceedings are for finalization of provisional assessment, which is a separate realm governed by Rule 7 of the Central Excise Rules. This Rule itself provides for determination not only of the amounts due/refunded but also for payment of interest. Order of Commissioner(Appeals) equating such proceedings for denial of refund with the adjudication proceedings under Section 11B cannot be justified.

7. Interest is either by way of operation of contract or by way of operation of law. When it is by way of operation of law, needs to be paid as per the provisions stated in law, which in this case is Rule 7(5). In our view all the three appeals need to be allowed to the extent of interest that needs to be determined under Rule 7(5) and paid to the appellants. Appeals are allowed in above terms.

(Dictated and pronounced in the open Court.)

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