2. The appellants are engaged in the manufacture of Waste paper based kraft paper and Baggasse of Kraft paper, falling under Chapter 48 of the schedule to Central Excise Tariff Act. They claimed exemption under Notification No. 48/91-CE dated 25.07.1991 for the period June, 1992 to January, 1994 and on according approvals, they effected clearances at NIL rate of duty. The officers concerned being under the belief that the appellants have wrongly availed exemption under said notification, have searched the premises of the appellants on 12.12.1996 and during the course of investigation, the appellants were directed to pay amount of Rs. 10,42,008/- and accordingly they have deposited the sum on 01.01.1997. A Show Cause Notice dated 26.06.1997 proposing to recover the duty amount amongst other proposals and also sought to appropriate the amount of Rs. 10.42 Lakhs paid by them towards duty liability. The notice was adjudicated by the Commissioner of Central Excise, Mumbai-III, vide his Order-in Original dated 27.11.1997 dropping the demand as hit by time bar. However, the penalty of Rs. 2.50 lakhs was imposed on the: appellants on the ground of non-maintenance of records under Rule 173Q of the Central Excise Rule and penalty was adjusted from the amount of Rs. 10.42 lakhs paid by the appellants during the course of investigation.
3. Thereafter, the appellants on 29.01.1998 applied to the jurisdictional Assistant Commissioner for refund of Rs. 7.92 lakhs.
Whereas the Assistant Commissioner, Central Excise, Kalyan-I Divn.
Issued a Show-Cause-Notice dated 28.04.1998 proposing to reject the refund claim amongst other grounds that the refund claim is hit by limitation under Section 11B of the Central Excise Act. On adjudication of such notice by order dated 30.06.1998, it is held that the assessee has not paid the duty under protest, as such the claim is time barred as per Section 11B of the Act. The appeal filed by the appellants was also rejected by the Commissioner (Appeals) vide impugned Order-in-Appeal dated 17.05.1999 relying upon the case of Mafatlal Industries .
i) The amount of Rs. 10.42 Lakhs was only deposit and not duty as could be evident from the Show-Cause-Notice and the Order-in-Original dated 27.11.1997 in as much as it was proposed to appropriate the said amount towards duty liability and in order of the Commissioner, dated 27.11.1997, the penalty of Rs. 2.50 lakhs was adjusted from the deposit made by the appellants.
ii) The time limit of six months will not be applicable as duty has been paid under protest in view of the provisions contained in the second provision to the Sub-section (1) of Section 11B. iii) The Hon'ble Gujarat High Court in the case of Parle International Ltd. held that amounts deposited during the appeal or adjudication proceedings can not be said to be duty and that such amounts deposited during the adjudication proceedings would amount to deposit and not duty in this case, the amounts which were paid before issue of Show-Cause-Notice were held to be deposit and the Revenue was directed to refund the amount.
iv) After having heard both sides and considering the submissions, it is felt necessary to look into the observations made in para 83 in the case of Mafatlal Industries The second proviso to Section 11B (as amended in 1991) expressly provides that the limitation of 6 months shall not apply where any duty has been paid under protest". "Now, where a person proposes to contest his liability by way of appeal, revision or in the higher courts, he would naturally pay the duty whenever he does, under protest. It is difficult to imagine a manufacturer would pay the duty without protest even when he contests the levy of duty, its rate, classification or any other aspect.
Again the Hon'ble Supreme Court in para 146 of the very same judgment categorically held as under: Alternatively, it may be stated that duty paid in cases, which finally ended in orders or decrees or judgments of courts must be deemed to have paid under protest, and the procedure and limitation etc. stated in Section 11B(2) read with Section 11B(3) will not apply to such cases.
5. Thus the ratio laid down both by the Constitution Bench of the Hon'ble Supreme Court clear in terms that the amount deposited by the appellants during the course of investigation of the case shall be deemed to have been paid under protest and therefore, the time limit prescribed under Section 11B(1) not applicable to the refund claim in question.
6. The ratio laid down in the Mafatlal Industries case has been followed by the Tribunal in the case of Suri Industries 2001 (132) E.L.T. 480 wherein identical issues were involved. It is observed that the amount deposited when enquiries were in progress as well as after the time issue of Show Cause Notice should be deemed to paid under protest, and time bar will not apply in this case (para 5(a) and (b) of the order.
7. Thus I am of the considered view that the ratio of the judgment held in para 83 and 146 would apply in all its four corners to the present case and refund deserves to be sanctioned with interest by allowing appeal.
8. In identical case the Hon'ble Bombay High Court in the case of Marmo Classic v. Union of India , the Hon'ble Punjab and Haryana High Court in the case of Bhagwati International v. Union of India and the Larger Bench decision of this Hon'ble Tribunal in the case of Arti Steel Ltd. v. CCE, Chandigarh 2003 (155) E.L.T. 180 (L.B.) have held that the Department is liable to pay the interest on pre-deposit as well as for the period from the date of expiry of three months after the date of application for refund till the date of payment.
9. Therefore, the impugned order passed by the Commissioner (Appeals) is hereby set aside holding that the refund is not barred by limitation and further the appellants are entitled for interest under 11BB of the Central Excise Act for the period from the date of expiry of three months after the date of application of refund till the date of payment. In the result, appeal is allowed.