ORDER
Rajesh Balia, J.
1. The question raised in this writ petition is about the claim of interest on the refund of Excise Duty, paid in excess by the petitioner, which has been ultimately found to be payable to the petitioner and not liable to be transferred to Consumer Welfare Fund under Sub-section (2) of Section 11B of the Central Excise Act, 1944.
2. Journey to this lis started with making of two applications by the petitioner on 3-1-1989 and 21-4-1989 laying claim to refund of Rs. 1,85,93,463/- and 20,29,894.12 paisa respectively. The Excise Duty paid by the petitioner on the clearance of its product was at full rate of Rs. 205 per metric ton between 1-5-88 to 21-11-88 under protest. The petitioner was claiming entitlement to rebate @ Rs. 50 per metric ton on full rate of duty as a 'new industrial undertaking' under Notification No. 36/87, dated 1-3-87.
3. The application was initially rejected by the Excise Commissioner, Central Excise by not accepting the claim of the petitioner's to be a new industrial undertaking.
4. By order dated 13-5-91, the Commissioner (Appeals) decided the case in favour of the petitioner. This led to a request for refund of the aforesaid sum vide application dated 15-2-92. A prayer was also made that the petitioner may be permitted to take credit of the aforesaid amount along with interest due on the amount claimed as refund in its future clearance.
5. However prayer was not granted. The order of the Commissioner, (Appeals) dated 13-5-91 was subjected to appeal by the Revenue before the CEGAT. The CEGAT upheld the claim of the Assessee petitioner vide its order dated 15-3-96 and dismissed the appeal.
6. The order of the CEGAT upholding the claim of the assessee as a new industrial undertaking and its entitlement to rebate and liability to pay Duty @ 155 per metric ton only instead of Rs. 205/- per metric ton for relevant time was accepted by the Revenue.
7. Still the refund was not to be made. Instead a show cause notice was issued to the petitioner in the first instance for transferring the amount of refund Rs. 1,85,93,463/- to the Consumer Welfare Fund under Sub-section 2 of Section 11B. This led to filing of D.B.C Writ Petition No. 629/2000 challenging the constitutional validity of Section 11B of the Central Excise Act, 1944.
8. At the hearing of the said writ petition challenge to the constitutional validity of Section 11B of the Central Excise Act was given up. It was also stated before the Court that the order directing the deposit of the aforesaid sum to the Consumer Welfare Fund has been subjected to appeal before the Commissioner (Appeals) challenging the finding. In view of the aforesaid circumstances the said writ petition was disposed of with the direction that the pending appeal before the Commissioner (Appeals) Central Excise Jaipur or his successor in office shall be decided as far as possible within the period of six months from the service of the order. The amount claimed as refund was directed to be deposited with any nationalised bank, if the amount has already not been transferred to the Consumer Welfare Fund. The amount so deposited was to be dealt with according to the final outcome of the appeal.
9. We are informed that in spite of the aforesaid direction no amount was deposited by the respondents in the interest bearing account with any bank. However, the same was not transferred to Consumer Welfare Fund also.
10. Be that as it may, ultimately vide its order dated 5-12-02 CEGAT it was held that the present petitioner is entitled to refund of the amount of excess Duty paid by him. The appeal filed by the petitioner was allowed with consequential reliefs to the appellant.
11. The Tribunal also observed that the petitioner's rightful claim for over a decade should be paid to him with utmost expedition.
12. Pursuant thereto the principal amount of refund has been paid to the petitioner. However, no interest on the aforesaid sum was paid by the respondents to the petitioner. Hence this petition.
13. The contention of the petitioner is that in terms of Section 11B read with Section 11BB the application for refund was required to be made within one year of the date. Duty was actually paid by the assessee in respect of which he claims a rebate and such application was made on 3-1-89 and 21-4-89 in terms of Section 11B of the Act of 1944. Since the refund was not made within three months of such application, and claim had been wrongfully rejected or withheld, the petitioner is entitled to claim interest at the rate or rates notified from time to time by the Board for the period during which such rates were in force with effect from expiry of three months from the date of application in terms of Section 11BB.
14. On the other hand learned Counsel for the respondents has urged that refund did not become due until CEGAT held in favour of the assessee-petitioner that the amount is not required to be transferred to the Consumer/Welfare Fund but is to be paid to the appellant. The period of three months within which refund was to be made without interest, is to commence from the date of the order of CEGAT and since payment was made within four months, the petitioner is entitled only to interest for one month for detention of refund amount beyond three months after the order passed by CEGAT on 5-12-2002.
15. Learned Counsel for the petitioner has rejoined that refund became due within three months, from the date of the application making claim to refund on the ground of excess Duty paid by him during the period in question and the application was made within one year from the date of payment of excess duty, the time requisite from the relevant date when the refund could be claimed by it. Merely because by resisting the claim of refund the due date of refund cannot be advanced to the date of final adjudication under the provision of Central Excise Act. It was pointed out by the learned Counsel for the petitioner that in the first instance Collector (Appeal) in 1991 held that assessee petitioner is entitled to rebate and then refund would have been made to the petitioner. The respondents preferred an appeal before the CEGAT which appeal also failed in 1996, still no refund was made and the amount was sought to be transferred to Consumer Welfare Fund instead of making payment to the petitioner. This has resulted into depriving the petitioner use of his money on account of erroneous orders passed by the respondents themselves. Under the statutory provision under Section 11BB as well as general law the petitioners are entitled to interest on such a late payment.
16. No contention on the issue that prior to the insertion of Section 11BB there was no specific provision governing the payment of interest on belated refunds but interests were being allowed on the basis of commercial principle namely to compensate the person whose money has been used by another. However, there was no legal foundation to lay a claim on the interest on delayed refunds, which could be forced by writ of mandamus.
17. In this connection attention may be invited to the case of Union of India v. E. Merck (India), 1998 (97) E.L.T. 218 (S.C.). The matter for consideration before the Supreme Court was about the issue of a mandamus by the High Court to the appellant Union of India for making interest @ 12%. The claim of payment of interest was founded on the ground that for wrongful detention of the excess amount of Duty by revenue, the revenue must compensate the assessee for use of his money. The High Court accepted the claim of the company and allowed the writ petition issuing a writ of mandamus directing the revenue to pay interest @ 12% on the amount of delayed refund of excess Duty to the respondent. The interest was directed to be paid for the period commencing on 21st January, 1974 till payment.
On appeal reversing the judgment of the High Court the Court said :
'there is no statutory or legal basis of the claim of interest indicated in the writ petition to furnish a ground for issuance of writ of mandamus. We may also note that the Tribunal's order did not by itself indicate the precise liability of the revenue to refund any specific amount to the respondent so as to give rise thereby to a liability to refund any specified amount on the date of the Tribunal's order.'
The Apex Court also observed that there is no provision in the Statute imposing obligation on revenue to pay interest on the amount refunded.
18. The aforesaid decision was rendered on 8-12-94 before the insertion of Section 11BB. Insertion of Section 11BB has made vital difference as now the statutory basis has been provided for imposing liability to pay interest' on the refund amount if amount of refund claimed is not paid within the time fixed in the statute.
19. Section 11BB which governs the statutory provisions relating to liability of revenue to pay interest on late refunds reads as under :
'11BB. Interest on delayed refunds, - If any duty ordered to be refunded under Sub-section (2) of Section 11B to any applicant is not refunded within three months from the date of receipt of application under Sub-section (1) of that section, there shall be paid to that applicant interest at such rate, (not below five per cent) and not exceeding thirty per cent per annum as is for the time being fixed by the Board, on such duty from the date immediately after the expiry of three months from the date of receipt of such application till the date of refund of such duty.
Provided that where any duty ordered to be refunded under Sub-section (2) of Section 11B in respect of an application under Sub-section (1) of that section made before the date on which the Finance Bill, 1995 receives the assent of the President, is not refunded within three months from such date, there shall be paid to the applicant interest under this section from the date immediately after three months from such date, till the date of refund of such duty.'
20. Section 11BB was inserted by Finance Act of 95 with effect from 26-5-95. At the time of insertion the minimum rate of interest required to be paid for delayed refund was 10% which has now been lowered to 5% vide amendment made by Finance Act in 2001 with effect from 1-6-2003. Section 11B refers to order passed under Section 11B and application made under Section 11B. Hence reference to Section 11B is also apposite which reads as under :
'Section 11B. Claim of refund of duty. - (1) Any person claiming refund of any duty of excise may take an application for refund of such duty to the (Assistant Commissioner of Central Excise or Deputy Commissioner of Central Excise before the expiry of (one year) (from the relevant date) (in such form and manner) as may be prescribed and the application shall be accompanied by such documentary or other evidence (including the documents referred to in Section 12A) as the applicant may furnish to establish that the amount of duty of excise in relation to which such refund is claimed was collected from, or paid by, him and the incidence of such duty had not been passed on by him to any other person : Provided that where an application for refund has been made before the commencement of the Central Excise and Customs Laws (Amendment) Act, 1991, such application shall be deemed to have been made under this sub-section as amended by the said Act and the same shall be dealt with in accordance with the provisions of Sub-section (2) substituted by the Act) (Provided further that) the limitation of (one year) shall not apply where any duty has been paid under protest.
2. If, on receipt of any such application, the (Assistant Commissioner of Central Excise or Deputy Commissioner of Central Excise is satisfied that the whole or any part of the duty of excise paid by the applicant is refundable, he may make an order accordingly and the amount so determined shall be credited to the fund : Provided that the amount of duty of excise as determined by (Assistant Commissioner of Central Excise or Deputy Commissioner of Central Excise) under the foregoing provisions of this subsection shall, instead of being credited to the Fund, be paid to the applicant, if such amount is relatable to -
(a) rebate of duty of excise on excisable goods exported out of India or on excisable materials used in the manufacture of goods which are exported out of India;
(b) unspent advance deposits lying in balance in the applicant's account current maintained with the (Commissioner of Central Excise);
(c) refund of credit of duty paid on excisable goods used as inputs in accordance with rules made, or any notification issued, under this Act;
(d) the duty of excise paid by the manufacturer, if he had not passed on the incidence of such duty to any other person;
(e) the duty of excise borne by the buyer, if he had not passed on the incidence of such duty to any other persons;
(f) the duty of excise borne by any other such class of applicant as the Central Government may, by notification in the Official Gazette, specify :
(Explanation - For the purposes of this section -(B) 'relevant date' means, -
(a) in the case of goods exported out bf India where a refund of excise duty paid is available in respect of the goods themselves or, as the case may be, the excisable materials used in the manufacture of such goods, -
(eb) in case where duty of excise is paid provisionally under this Act or the rules made thereunder, the date of adjustment of duty after the final assessment thereof;) (w.e.f. 1-8-98)
(f) if any other case, the date of payment of duty.)'
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. 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.
23. The scheme of payment of interest on belated payment of refund under the Central Excise Act, 1944 is one integrated within the provisions of Section 11B and 11BB. They have to be read together.
24. Sub-section 2 of Section 11B requires of making an application for claiming refund and provides limitation within which application is to be made from the relevant date. 'The relevant date' has been defined for the purpose of Section 11B in Clause (B) to the Explanation appended to Section 11B. Sub- Clauses (ea) & (eb) in the Explanation were inserted by Finance Act, 1998. The petitioner's case is governed by Sub-clause (f) of Clause (B) of Explanation. Relevant date for computing the period of limitation for making application under Explanation (B)(f) is the date of payment of the Duty. Read together it would reveal that the claimants were required to make an application for refund within one year from the date of payment of Duty under protest which became the relevant date to claim refund for the petitioner.
25. Even according to the facts which are not in dispute it is apparent that assessee petitioner has laid claim before the Assistant Collector himself at the time of making payment of Duty at full rate, under protest and claimed that he is entitled to rebate in the full rate of Excise Duty payable on clearance of goods manufactured by him as 'a new industrial undertaking' in terms of Notification No. 36/87, dated 1-3-87 which allowed a rebate of Rs. 50 per metric ton on full rate of Duty. Application for claiming refund on the amount of Duty paid in excess of Duty chargeable was also made within the period of one year from that date.
26. Obviously for the purpose of inviting operation of provision of Section 11B read with its proviso, the first obligation was fulfilled by the assessee petitioner by filing application within prescribed time from the relevant date laying claim to refund of excess Duty paid by him under protest.
27. It is not in dispute now that the petitioner was found to have paid excess Duty firstly by Collector (Appeals) on 13-5-91. CEGAT too found the petitioner entitled to rebate vide its order dated 15-3-96 which order was not subjected to further challenge.
28. Yet the amount was not refunded nor allowed to be adjusted against future dues. Instead it was sought to be transferred to Consumer Welfare Fund under Section 11B. However, ultimately it was also found that the petitioner is entitled to refund as his case is governed by proviso to Section 11B, by the CEGAT vide its order dated 15-2-2002. The amount of refund has been paid to the petitioner within four months from the date of the order of the Tribunal dated 15-12-2002 holding that the amount of refund was not liable to be transfer to Consumer Welfare Fund. At the same time it is also not in dispute that when the provision of Section 11BB were inserted on 26-5-1995 the amount of refund claimed by the petitioner has not been paid to him and proceedings in pursuance of his application for refund under Section 11B were pending. Therefore, it would also invite operation of Section 11BB as per proviso to Sub-section (1) of Section 11BB.
29. Considering the contention raised by the learned Counsel for the respondents it can be said without hesitation that the petitioner was entitled to refund in pursuance of his application laying claim to rebate in terms of Notification No. 36/87. The claim was accepted by the Collector (Appeals) by his order dated 13-5-91 and at any rate when the CEGAT ultimately upheld the claim of the petitioner to rebate. On the respondents own showing the refund became due, if it were to become due on the determination by the competent authority, on the date CEGAT dismissed the appeal of Revenue on 15-3-96. Still no payment of refund was made to the petitioners.
30. The fact that thereafter the time was taken by respondents to decide whether such excess amount will be paid to Consumer Welfare Fund or to the assessee will not affect the end result that it could not be retained by respondents as tax collected by them without authority of law. Only issue was to be to whom it is to be paid. None will suffer delay.
31. In this connection we may notice the provision of Sub-section (2) of Section 11B. The principal provision required the Excise Officer to deposit the amount of refund in Consumer Welfare Fund. However, the assessee claimed that he is entitled to refund under the proviso to Sub-section (2) of Section 11B as the amount is not liable to be paid to Consumer Welfare Fund. This question is required to be adjudicated. The Assisting Authority did not agree with the same and rejected the claim of assessee that refund be made to the applicant and directed that amount may be deposited with the Consumer Welfare Fund. However, the applicant succeeded before the CEGAT finally vide order dated 15-12-2002 and the principal amount of the refund has been paid within four months thereafter.
32. This brings in the question whether in such circumstances the petitioner could lay claim to the interest for the period prior to the expiry of three months, from the date of order, dated 15-12-2002.
33. A close reading of Section 11BB, which now governs the question relating to payment of interest on belated payment of interest, makes it clear that relevant date for the purpose of determination the liability to pay interest is not the determination under Sub-section (2) of Section 11B to refund the amount to the applicant and not to be transferred to the Consumer Welfare Fund but the relevant date is to be determined with reference to date of application laying claim to refund. The non-payment of refund to the applicant claimant within three months from the date of such application or in the case governed by proviso to Section 11BB, non-payment within three months from the date of the commencement of Section 11BB brings in the starting point of liability to pay interest, notwithstanding the date on which decision has been rendered by the competent authority as to whether the amount is to be transferred to Welfare Fund or to be paid to the applicant.
34. If ultimately it is decided that notwithstanding the refund has become due as per final adjudication and amount is to go to the Consumer Welfare Fund it brings an end to the claim of the applicant whether to refund or interest thereon. However, ultimately if it is found that amount is not to go to the Consumer Welfare Fund but is to be refunded to the applicant, in such event merely because of the time taken in deciding the issue the applicant can not be deprived of the interest on delayed payment of refund which ought to have been paid by the authorities in the first instance within three months of the application for claiming refund.
35. Reading of Section 11BB together with Section 11B makes the position very clear. Section 11BB unfold, that stage of making payment of refund to any claimant is reached only when order under Sub-section (2) of Section 11B is made to that effect instead of transferring the amount of excess Duty to Consumer Welfare Fund. This is so because under the provision of law ordinarily amount of excise Duty claimed by the Excise Dept. has to be transferred to Consumer Welfare Fund. The assessee gets actual refund only when order is made with reference to any of the clause of proviso to Sub-section (2) of Section 11B.
36. However, the payment of interest was linked not to the order under Section 11B, but with the application required to be made under Section 11B (1). As discussed above every person who claims a refund is first required to make an application under Section 11B before time limit stated therein from the relevant date. The relevant date defined under Explanation B(f), applicable to present case, is the date of payment of Duty and not the date of determination about excess payment of Duty. Until substituted vide Finance Act, 2000, any claimant, to refund was required to make an application before expiry of six months from the relevant date, which in the case of the petitioners, who did not fall within Clause (a)(e) of Explanation B to Section 11B was the date of payment of Duty. The period for making such applications since Finance Act, 2000 has been enhanced to one year.
37. Interest has been made payable with effect from the expiry of three months from the date of application made under Section 113(1), in case where refund is required to be paid to such applicant as per orders passed under Section 11B. The making of application is not linked with adjudication about excess payment but is linked with payment of Duty.
38. Therefore, there is no room to link payment of interest with adjudication of excess payment Section 11BB says that if any order under Sub-section 2 of Section 11B is passed and the amount is not refunded to applicant within three months from the date of receipt of application under Section 11B liability to pay interest arises. It does not provide for payment of interest on factum of making payment of refund amount within three months from the date of the order passed under Sub-section 2 of Section 11B. But clearly creates liability to pay interest with effect from expiry of three months from the date of application.
39. Viewed from this point, in this matter it is apparent that notwithstanding the order under Sub-section (2) of Section 11 has been passed by CEGAT in appeal only on 15-12-2002, but as the application to claim refund has been filed much earlier before the date when it was required to be filed and the amount having not been made within three months from the date of application, the applicant became entitled to interest with effect from the such date on principal amount to be refunded to him ultimately pursuant to an order made Under Section 11B at the rate notified by the Board from time to time, with effect from the date of expiry of three months from the date of application until date of payment of arrears of amount of excess Duty to Consumer Welfare Fund.
40. Since we have noticed above that prior to insertion of Section 11BB there was no statutory provision providing for interest on refund of amount of excess Duty if not paid within a specified date, there is no statutory provision providing for interest on non refund of amount of excess duty within a specified period or on specified date until insertion of Section 11BB. In the absence of any statutory provision for payment of interest no mandamus could be issued for payment of interest for the period prior to one provided in Section 11BB.
41. However, Proviso to Section 11BB which makes the provision applicable to pending applications if the refund amount is not paid within three months from the date Finance Bill received assent of the President, the entitlement of the petitioner to claim refund from such date cannot be denied to him.
42. Accordingly the petition is allowed, the respondents are directed to pay interest on the amount of refund ordered to be paid to the applicant under Sub-section 2 of Section 11B with effect form the expiry of three months from the date Section 11BB came into force that is to say w.e.f. 26-5-1995 which is the date of expiry of three months from 26-5-1995, until the date of actual payment. The interest shall be computed at the rate or rates which have been notified from time to time during the period for which the interest has to be paid to the petitioners. The order shall be complied within a period of two months from the date of receipt of writ or submission of certified copy of this order before appropriate officer whichever is earlier.
43. There shall be no order as to costs.