In National Leather Cloth Mfg. Co. vs. The Union of India and others, Bombay High Court held that the Department can not deny the refund to the assessee even if the proceedings are pending before Higher Authority. Interest on delayed refund shall also be payable.   

 Facts of the case:

National Leather Cloth Mfg. Co.  (the appellant) was a  manufacturer of excisable  goods. The appellant used to utilize the Cenvat credit for Duty to be paid under the Additional Duties of Excise (Textile and Textile Articles) Act, 1978. During the period January 1995 to March 1997, appellant utilized cenvat credit of Rs. 41,01,467 on inputs.

 

The Department viewed that the credit was wrongly utilized. Therefore, demand was raised. The appellant deposited the demand during April and May 1997. A show cause notice was issued and the demand of Rs. 41,01,467 was confirmed. An equal penalty was also imposed on the appellant.

 

The case went to the Tribunal. On 12^th March, 2004, the order was quashed and set aside. On the basis of this order, a refund application was filed by the appellant. But such application was rejected by the Deputy Commissioner of Central Excise.

 

The appellant again appealed to the Tribunal. The Tribunal passed an Order and set aside the Commissioner (Appeals) Order and directed the authority to implement the Order of the Tribunal within 90 days of receipt. Thus, the refund was granted to the appellant.

Aggrieved by the interest on the refund, the appellant approached the same Commissioner. An order was passed directing to pay the interest on the refund at 6% from May 4, 2004 till the actual date of payment. Inspite of such order passed, interest on refund was not paid by the Department. Thus, the appellant filed an appeal before the High court.

 

It was held that:

The Court noted that the Department had preferred an appeal to this Court against the Order of sanctioning of refund passed by the Tribunal and further another appeal to the Tribunal against the order of Commissioner passed for payment of interest on refund.

Thus, the High Court held that the law provides that in the event, amount is not paid within a specified time, then, the Department will have to pay interest, unless and until, the Department had received any preventive or prohibitory order and direction. The Department can not deny the interest merely because of the pendency of the proceeding before the Tribunal and the Court. Therefore, the Department cannot refuse to release the interest.

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