RAJALAKSHMI TEXTILE PROCESSORS Vs. COMMISSIONER OF C. EX.

JUDGEMENT

(1.) The appellants are aggrieved by orders of the lower authorities rejecting their claims for interest on amounts refunded under Rule 5 of the Cenvat Credit Rules, 2001/2002. They had outstanding input duty credits in their Cenvat Credit account, which they were unable to utilise inasmuch as their final products were exported under Bond. They filed claims for refund of these credit amounts in terms of Rule 5 of the Cenvat Credit Rules, 2001/2002. These claims were sanctioned to them, albeit belatedly. As the amounts refunded by the department were received by the appellants beyond the period of three months prescribed under Sub -section 1 of Section 11BB of the Central Excise Act, they claimed interest on these amounts for the period of delay. These claims were rejected by the original authority and the first appellate authority, both of which held that no interest was admissible to any amount of Modvat credit refunded under Rule 5 ibid. Hence these appeals.

(2.) After hearing both sides, I find that the question to be decided upon is whether the provisions of Section 11BB are applicable to a claim of interest on an amount of Modvat credit belatedly refunded under Rule 5 ibid. Ld. Counsel for the appellants has relied on the Board's Circulars No. 130/41/95 -CX., dated 30 -5 -1995 and No. 670/61/2002 -CX., dated 1 -10 -2002 and has also claimed support from the decision of the Gujarat High Court in Indo -Nippon Chemicals Co, Ltd. v. U.O.I . He has also relied on the Tribunal's decision in the case of CCE, Mehsana v. Annapurna Plastopack Pvt. Ltd. . Ld. Counsel has also fairly pointed out that the Tribunal's decision in Ahmedabad Steel Craft v. CCE, Ahmedabad is against the appellants. In this connection, however, he has also urged that the view taken in the case of Ahmedabad Steel Craft (supra) may not be followed on account of the fact that such view was taken regardless of the provisions of Section 11B and without considering the Board's circulars. Ld. SDR has submitted that neither under Rule 5 of the Cenvat Credit Rules nor under any Notification issued under that Rule was any provision made for payment of interest on any amount of input duty credit refunded under the Rule. According to her, the procedure laid down in respect of such refund claims, by Notification No. 11/2002 -C.E. (N.T.), dated 1 -3 -2002 issued under Rule 5 of the Cenvat Credit Rules, 2002 is a self -contained scheme, to which nothing contained in Section 11BB of the Act is applicable. It is pointed out that only the limitation provisions of Section 11B have been made applicable to a claim for refund of input duty credit filed under Rule 5. In all other respects, according to SDR, Section 11B stands excluded from the area occupied by refund claims under Rule 5 and, consequently, the interest provisions of Section 11BB are inapplicable to such refunds.

(3.) After giving careful consideration to the submissions, I find that the refund claims in question were allowed under Rule 5. What was prescribed by Notification No. 11/2002 -C.E. (N.T.) issued under Rule 5 was the procedure for the filing and processing of refund claims under the said Rule. Once such a claim is allowed by the authority, the procedure laid down under the Notification stands exhausted. The question whether any interest is payable on the amounts refunded depends on whether the refund is made beyond any prescribed period. Rule 5 is silent on this aspect. But Section 11BB covers this area. It is provides for payment of interest for any period of delay beyond three months from the date on which the refund is claimed. This provision is applicable to any duty ordered to be refunded under Sub -section (2) of Section 11B. Admittedly, the refunds in question were ordered under Sub -section 2 of Section 11B vide Clause (c) of the proviso to Sub -section (2) of Section 11B. In Circular No. 670/61/2002 -CX., dated 1 -10 -2002, the Board has also clarified that the provisions of Section 11BB of the Central Excise Act are attracted automatically for "any refund" sanctioned beyond a period of 3 months. I note that the provisions of Section 11B or those of Section 11BB were not referred to by the Tribunal in the case of Ahmedabad Steel Craft (supra) while holding that no interest was payable on Modvat credit amounts refunded. The Tribunal had no occasion to consider the above circular either. In the circumstances, it has to be held that the Tribunals decision in Ahmedabad Steel Craft (supra) is per incuriam. On the other hand, the decision in Annapurna Plastopack (supra) which has referred to the provisions of Section 11B(2) and Section 11BB appears to be the correct proposition of law and the same requires to be followed.