29 Jan 2121

The authority's blatant and sweeping claims that the enterprises are not entitled to interest on delayed Excise Duty refunds cannot be sustained - Gauhati High Court

Case : M. K. Jokai Agri Plantations (P) Ltd. and Ors. v. Union of India and Anr. WP(C)/699/2019

Court : Gauhati High Court

Bench : Justice Soumitra Saikia

Decided on : 29 Jan 2121

The Relevant Statutes

Section 11BB, 11B, 5A (1), 11B (1), 11B (2), 11 of the Central Excise Act 1944

Section 119, 32A, 263 of the Income Tax Act 1961

Companies Act, 1956

Brief Facts & Procedural History

1. The petitioner no. 1 company is a limited liability company constituted under the Companies Act, 1956, with a registered office at “VRAJ”, 62/13, Promotesh Baruah, Sarani, Kolkata -700019, West Bengal. The Muttuck Tea Estate, which was previously owned by M/S Hindustan Lever Limited and is now owned by M/S Rossell Industries Limited, is the second petitioner. The Tea Estate eventually came under the control of the petitioner no. 1 corporation. Mr Ashok Sanghvi, Assistant General Manager- Finance & Taxation of petitioner No. 1 firm, represents both petitioners in the current proceedings.

2. The petitioner claims that the Government of India proposed a fresh package of fiscal incentives and other concessions for the North East area under the "North East Industrial Policy" (NEIP) of 1997. The numerous incentives offered and promised for new Industrial Units and Industrial Units undergoing significant expansions took effect on April 1, 1997. According to the said Notification No. 33/99-CE, all Industrial Units that existed before December 24, 1997, and that undertook substantial expansion by increasing installed capacity by not less than 25% on or after December 24, 1997, were eligible for all of the exemptions contained in the said Notification. According to the said Notification, manufacturers/industries must submit a statement of duty paid from their current account to the Assistant Commissioner/Deputy Commissioner Central Excise by the 7th of the following month, and the amount claimed will be refunded by the Central Excise department after due verification by the 15th of the following month.

3. By the said Notifications, the petitioner company expanded by 25% in the Tea Estate, namely Muttuck Tea Estate (petitioner No. 2), and filed returns in the form of RT/12 for July 1999 to March 2003, demonstrating that the duty was paid by Notification No. 33/99-CE. However, in the year 2001, the important records and correspondences of the company, including paperwork substantiating the enormous increase, were all destroyed in a fire that broke out in the company's head office in Doom Dooma in the state of Assam. According to reports, the incident was reported to the Superintendent of Central Excise and Customs.

4. From July 1999 to March 2003, petitioner No. 2 requested a refund of excise duty. The claim for a refund was accompanied by an inventory of machines and equipment for the pre-and post-expansion periods, which was duly validated by a Chartered Engineer and demonstrated the significant expansions undertaken. The petitioners' refund claims were challenged by the department, which issued a show-cause notice. By replying to the show-cause, the petitioners responded to the show-cause. However, the petitioners' claims for reimbursement in respect of petitioner no. 2 in the amount of Rs.39,33,061/- were refused by the Assistant Commissioner Central Excise, Dibrugarh, who ruled that they were time-barred.

5. The petitioners filed (Appeals) with the Commissioner Central Excise, Customs, and Service Tax (Appeals) in Guwahati after being aggrieved. The petitioners' appeals were permitted by the Commissioner of Appeals, who found that it would be unfair to deny the petitioners' reimbursement claim based on delay. The Revenue filed a new appeal with the Central Excise, Customs, and Service Tax Appellate Tribunal in Kolkata, challenging the Commissioner's decision (CESTAT). The CESTAT granted the Revenue's appeals, ruling that a statement must be filed to seek a refund under the Notification and that filing of RT-12 is not a suitable statement. The petitioners, who were aggrieved by the CESTAT order, filed a Central Excise Appeal with this Hon'ble Court, which was recorded and numbered as Central Excise Appeal No. 08/2016. This Hon'ble Court, in a judgement and order, allowed the appeal and overturned the CESTAT's decision.

6. That, following this Hon'ble Court's decision, the Assistant Commissioner, the Central Goods and Service Tax, by order-in-original No. 15/REF/DIV/DIB/ACD/18-19, determined that the petitioners were eligible for a refund of Central Excise tax and sanctioned a refund of Rs. 39,33,061/- for the period July 1999 to February 2003.

7. Following that, the petitioners filed a case with Respondent No. 3 seeking interest on a delayed return of Central Excise Duty under Notification 33/1999, as ordered by the court. In response to the petitioners' claim of interest on a delayed refund of excise duty, the Department sent a show-cause notice to the petitioners, requesting that they show cause why their claim should not be rejected. The petitioners, through their counsel, went before the Deputy Commissioner Central Excise and Service Tax Dibrugarh Division and argued their claim for interest on a Central Excise refund that had been delayed, citing multiple court decisions in support of their claim. The petitioners' demand for interest on a delayed refund of Central Excise duty was denied by the Deputy Commissioner Central Goods and Service Tax Dibrugarh in an order. The petitioners have addressed the The Honourable Gauhati High Court through the current writ proceedings because they have been wronged.

The Issue(s) of the Case

Whether the impugned order in-original no. 28/R/11B/DIV/DIB/ACD/18-19 dated 31 December 2018 passed by Deputy Commissioner, Central GST Division, Dibrugarh, Assam valid?

The Observations of the Court

1. The Honourable Gauhati High Court observed that A close examination of the judgement of the Division Bench of The Honourable Gauhati High Court reveals that the petitioner's claim for interest on a delayed refund of Central Excise Duty was upheld in clear and unmistakable terms. The Honourable Gauhati High Court has decided that the provisions of the Central Excise Act 1944 related to the grant of interest on delayed refunds apply equally to situations involving the delayed return of Excise Duty paid under order in connection to notification no. 33/99 dated 08-07-1999. Apart from that, it can be seen from the case laws referred to the learned senior counsel for the petitioner that similar orders were issued by the same Division Bench in the case of Kaziranga Tea Manufacturers and Anr vs The Union of India & Ors in WP(C)/2325/2012 decided on 08-11-2012, holding the petitioner's claims in respect of an interest in the delayed refund.

2. Referring to the case Pan Parag India Ltd. vs The Union of India (WP(C)/4772/2016), another Division Bench of The Honourable Gauhati High Court had adjourned the proceedings after hearing submissions that repayment orders had been issued to the manufacturer (the petitioner in this case) in response to a Departmental Appellate Authority directive. As a result, the Division Bench of The Honourable Gauhati High Court's decision in Amalgamated Plantation (P) Limited WP(C)/1166/2012, has been consistently adopted by this High Court and/or its successors in future judgments/orders. The Revenue's learned counsel also does not deny that the said Judgment's operation has not been halted by any interim orders issued by the Apex Court in any appeal filed by the Revenue. As a result of the judgement and order issued in Amalgamated Plantation (P) Limited WP(C)/1166/2012, Section 11BB is equally applicable to exercise refunds given under Notification No. 33/99 dated 08-07-1999 as of today. 

3. Referring to the cases Hindustan Aeronautics Ltd. v. CIT, (2000) 5 SCC 365, Keshavji Ravji & Co. v. CIT, (1990) 2 SCC 231, CIT v. GM, Mittal Stainless Steel (P) Ltd., reported in (2003) 11 SCC, Ram Bai vs Commissioner of Income Tax reported in (1999) 3 SCC 30, Kamalakshi Finance Corporation Ltd. reported in 1992 Supp (1) SCC 443, it is clear that once a judicial pronouncement is issued by the High Court or the Supreme Court, it has a binding impact on all Subordinate Agencies, including quasi-judicial authorities like the respondent in this case, unless it is later overturned by judicial methods. The respondent Department cannot, by referring to departmental circulars, arrive at a divergent perspective and/or even attempt to disregard the judgement of the jurisdictional High Court holding the field at the time, unless they file an appeal and seek to reagitate the issues already decided by The Honourable Gauhati High Court.

4. Referring to the case of Amalgamated Plantation (P) Limited WP(C)/1166/2012, The Honourable Gauhati High Court determined that interest is due on late excise duty refunds and that the same rule applies to refunds made under notification no. 33/99 dated 08-07-1999. Even though, as submitted by the learned standing counsel, the question of law was left open in dismissing the Revenue's SLP based on limitation, the Revenue did not refer to the Board's Circulars dated 19-12-2002 and 08-12-2006, which the Revenue claims were not considered by The Honourable Gauhati High Court in rendering the judgement in the case of Amalga. In the absence of any such pleadings and submissions before The Honourable Gauhati High Court to substantiate such claim, no interpretation of the Board's said Circular concerning the applicability of the current provisions of Section 11B and Section 11 BB of the Central Excise Act, 1944 in respect of refunds made by notification no. 33/99 dated 08-07-1999 is required.

The Decision Held by the Court

1. The Honourable Gauhati High Court held that as claimed and held in the Amalgamated Plantation (P) Limited WP(C)/1166/2012 verdict, the petitioners are entitled to interest on delayed repayment. The impugned judgement dated December 31, 2018, is set aside and quashed, and the Revenue is directed to review the petitioners' claim of interest on delayed refund and, after proper calculation, discharge the claim of interest on delayed refund.

2. The entire excise shall be fulfilled within 60 days of the Revenue's receipt of the certified copy of this order.

3. This writ petition is approved in light of the discussion above. There is no expense order.

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