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Rohtak. The stay application as well as the appeal are taken up together for hearing and disposal as per the earlier order dated 20.01.2020 and with the consent of both sides.

2. The Revenue is in appeal assailing the impugned order on the ground that the learned Commissioner (Appeals) erroneously directed refund of ₹ 29,91,483/- and interest on the amount paid during investigation from the date of actual payment of the duty to the payment of refund.

3. To appreciate the dispute, it is necessary to analyse the facts of the case giving rise to refund of the duty claimed by the respondent. The respondent are engaged in the manufacture of Chewing tobacco without lime which has been subjected to compounded levy being notified under section 3A of the Central Excise Act, 1944. The respondent had filed necessary declaration under relevant rules declaring the number of machines installed in the factory for determination of annual capacity of production of the installed machines and in turn for payment of duty. The adjudicating authority, to ascertain the correctness of the commodity declared as manufactured, drawn samples and sent for testing at CRCL, New Delhi. From the test report it revealed that the appellant are engaged in the manufacture of Jarda Scented Tobacco classifiable under CSH 24039910 and not Chewing Tobacco without lime tube falling under CSH 24039930 as declared. Consequently, after handing over the test report, the adjudicating authority determined the annual production capacity of installed machines considering the commodity as Jarda Scented Tobacco for the period from July 2015 to January

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2016. The respondent assailed the said orders by filing Appeals before the Commissioner (Appeals). In the meantime, on the basis of intelligence, an investigation was initiated by the Department and on completion of the investigation, it is alleged that the respondent had manufactured Jarda Scented Tobacco but discharged less duty considering the manufactured products as Chewing tobacco without lime tube. During the course of investigation, after the test report was issued, the respondent paid differential duty of ₹17,99,72,033/-as applicable to Jarda Scented Tobacco and interest of Rs.41,43,757/- for the period from July 2015 to January 2016 under protest. Later, show cause notice was issued on 01.07.2016 proposing various action against the respondent including appropriation of the duty, interest paid during the course of investigation.

4. The orders fixing the annual capacity of production under the relevant rules were passed by the Deputy Commissioner and the same were challenged before the Commissioner (Appeals), who disposed the appeal observing that on the same issue of classification of the declared commodity, show cause notice dated 01.7.2016 issued by the Dept. is pending adjudication, hence the appeals are premature and infructuous. The said order was accepted by the respondent, however, challenged by the Revenue disputing certain findings of the learned Commissioner (Appeals) being the subject matter of Appeal No. E/60106/17. The said appeal was disposed by the Tribunal with direction to the Commissioner, Central Excise to adjudicate the pending Show Cause Notice 01.7.2016 at the earliest.

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5. The present dispute relates to refund claim of ₹15,61,27,927/- filed by the Respondent on 20.04.2017. It was filed on the ground that they have paid/deposited the differential duty under protest during investigation, but the show cause notice dated 01.07.2016 issued on completion of investigation had not been adjudicated till that date. A show cause notice proposing rejection of the refund claim was issued to the respondent. On adjudication, the refund claim was rejected. Appeal against the said order before the Commissioner (Appeals) also got rejected. Aggrieved by the same, they filed second appeal before this Tribunal, and by order dated 30.8.2018 this Tribunal allowed their appeal and directed the adjudicating authority to refund the amount. Pursuant to the said direction, the adjudicating authority scrutinised the quantum of refund claim and noticed that an amount of ₹29,91,483/- was not supported with payment particulars. Accordingly, a letter was written to the respondent to place evidence in support of the said amount. As the respondent did not have any evidence relating to the said claim of ₹29,91,483/-, they withdrew the same from the total claim. However, later they filed appeal before the Ld. Commissioner (Appeals) against rejection of the said amount and also claimed interest on the amount deposited. The learned Commissioner (Appeals) allowed their appeal. Hence, the Revenue is in appeal.

6. The ld. A.R for the Revenue has submitted that the learned Commissioner (Appeals) is erred in allowing the refund amount

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of ₹29,91,483/-, even though the respondent had voluntarily withdrew the said amount since they could not produce evidence in support of payment of the said amount. Further, he has submitted that the finding of the Commissioner (Appeals) that the said amount relates to payment of duty for 3 days during which the factory was closed, is extraneous and devoid of merit. It is his contention that refund claim cannot be filed under section 11B of Central Excise Act, 1944 for the period of closure of the factory as the respondent was engaged in manufacturing and packing of Jarda Scented Tobacco and paying central excise duty as per Pan Masala Packing Machines (Capacity Determination and Collection of Duty) Rules, 2008. The Respondent should have claimed abatement for non-production of goods in accordance with Rule 10 of the said Rules. Since the laid down procedure has not been followed, therefore, the abatement is also inadmissible.

7. The learned AR for the Revenue has further submitted that since the learned Commissioner (Appeals) held that the amount deposited during the course of investigation is not a duty but deposit, accordingly, interest is admissible under section 11BB of Central Excise Act, 1944 from the date of deposit of differential duty is unsustainable in law. He has further contended that reliance placed by the Ld Commissioner (Appeals) on the judgement of Tribunal in the case of Amidhara Texturising Private Limited Vs. CCE-2012 (278) ELT 257 is misplaced as the facts involved in the said case is different from the present one. In the present case, the Respondent deposited the differential

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duty pursuant to the capacity determination order of the adjudicating authority, since the commodity declared, on chemical test, found to be 'Jarda Scented Tobacco' and not 'Chewing Tobacco without lime tubes'. He has submitted that the said Orders of adjudicating authority still holds good as the Appeals against the said Orders by the party were rejected by the Commissioner (Appeals). He has submitted that till the time, the show cause notice dated 01.07.2016 is not decided the differential duty paid by them pursuant to the said Orders and during investigation cannot be construed as deposit and not duty. Consequently, interest directed to be paid from the date of deposit of the said amount by the Ld Commissioner (Appeals) is unsustainable in law.

8. Ld. Consultant for the Respondent reiterating the findings of the ld. Commissioner (Appeals) submitted that the amount deposited during investigation has been refunded to them as directed by the Tribunal, as the issue of classification of the commodity was pending adjudication for a long time. It is his contention that therefore the interest from the date of deposit of the differential amount ought to have been paid to them. For the refund amount of Rs.29,91,483/-, the Consultant has submitted that since the amount has been collected by the Department at the end of the month, no further evidence is required to be submitted about its payment, hence the ld. Commissioner (Appeals) also allowed the refund of the same. He has fairly submitted that through their letter dt.05.4.2020 they have withdrew the claim amount of Rs.29,91,483/-.

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9. Heard both sides and perused the records.

10. The issues involved in the present appeal for determination are -

(i) Whether the refund amount of Rs.29,91,483/- is correctly allowed to the Respondent;

(ii) Interest on the total refund amount of Rs.15,61,27,257/- is payable to the respondents from the date of its deposit.

11. We find that the appellant had declared the goods manufactured by them as 'Chewing Tobacco without lime tube' and accordingly discharged duty @ Rs.38.64 Lakhs under Section 3A of Central Excise Act,1944 read with relevant Notification on the number of machines installed in the factory for the period from July, 2015 to January, 2016. Later, on chemical analysis at the instance of the Dept. at CRCL, New Delhi, the commodity was found to be not Chewing Tobacco but Jarda Scented Tobacco classifiable under sub-heading 24039930 of Central Excise Tariff Act, 1985. Thus, the duty required to be discharged on Jarda scented Tobacco as per the relevant notification was Rs. 82.11 lakhs, higher than the duty that was paid on Chewing Tobacco without lime tube during the relevant period by the respondent. Consequently, investigation was initiated against the respondent. The respondent during the course of investigation, deposited the differential duty amount of Rs.17,99,72,033/- and interest of Rs.41,43,757/- for the period

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July, 2015 to January, 2016. A show-cause notice was issued to the Respondent on 01.07.2016 proposing to appropriate the differential duty & interest amount paid and other actions against the respondent. Later, the respondent had filed refund claim of Rs.15,61,27,927/- during the pendency of the adjudication of the said show-cause notice on the ground of inordinate delay in adjudication. The adjudicating authority rejected the said claim and on appeal, the ld. Commissioner (Appeals) upheld the said rejection Order. However, on further appeal to Tribunal, the refund claim was directed to be paid and consequently the adjudicating authority sanctioned the refund claim.

13. From the said refund claim, an amount of Rs.29,91,483/- was denied to the respondent on the ground that no documentary evidence was placed before the adjudicating authority in support of the said claim and the respondent subsequently withdrew the said claim. The Revenue has challenged the finding of the Ld. Commissioner (Appeals) allowing the said amount to the Respondent as admissible. We do not find any merit in the observation of the ld. Commissioner (Appeals) in allowing the rejected amount of Rs.29,81,483/- when the respondent himself withdrew the refund claim in absence of documentary evidence of payment of duty for the period from July, 2015 to January, 2016. Since, the said amount was withdrawn by the respondent the adjudicating authority has no occasion to examine its admissibility and record a finding in this regard. The Commissioner (Appeals) finding that the

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respondent would have paid the duty during the closure of the factory is based on extraneous factors, and thus de hors the records of the case and accordingly devoid of merit, hence unsustainable in law. Consequently, the finding of the ld. Commissioner (Appeals) allowing the said refund amount is devoid of merit and accordingly set aside.

14. As far as the issue of interest on the deposit is concerned, it is not clear whether the same was also raised before the adjudicating authority. We find that the show-cause notice dt. 01.7.2016 issued alleging mis-classification of the commodity declared by the respondent and also there is proposal for appropriation of the differential duty paid with interest consequent to the capacity determination order passed. The said notice is yet to be adjudicated/decided. Till the time the show cause notice is adjudicated, the amount paid by the respondent cannot be said to have attained finality and refundable to them. The Tribunal directed the return of the said amount deposited by the respondent during investigation in all fairness attributable to inordinate delay of adjudication of the Show Cause Notice issued by the department. Needless to emphasize it is an interim measure caused to mitigate the hardship to the respondent for the delay in adjudication by the department. But, that does not mean that respondent can retain the said amount even if the issue of classification is decided against them. Therefore, the ld. Commissioner (Appeals) order directing payment of interest from the date of deposit of the said amount is also devoid of merit and accordingly set aside.

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15. In the result, the Order impugned is set aside and the Revenue's appeal is allowed. Stay application is also disposed off.

(Operative portion of the order pronounced in court)

(D. M. MISRA)

MEMBER (JUDICIAL)

(SANJIV SRIVASTAVA)

MEMBER (TECHNICAL)

Sinha

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PER: SANJIV SRIVASTAVA

While concurring with the order proposed by my learned brother Member (Judicial), I would like to add as follows:

2.0 Any refund made under a taxing statute are governed by the provisions of the said statute, and no refund can be made beyond the provisions of said statute as has been held by the nine member bench of the Apex Court, in case of Mafatlal Industries [1997 (89) ELT 247 (SC)]. In the said decision Hon'ble Apex Court has clearly laid down that there can be no refund made in terms of Section 11B of the Central Excise Act, 1944 without a refund claim. The relevant excerpts from the decision are reproduced below:

"96. It would be evident from the above discussions that the claims for refund under the said two enactments constitute an independent regime. Every decision favourable to an assessee/ manufacturer, whether on the question of classification, valuation or any other issue, does not automatically entail refund. Section 11B of the Central Excise Act, 1944 and Section 27 of The Customs Act, 1962, whether before or after 1991 amendment - as interpreted by us herein - make every refund claim subject to proof of not passing on the burden of duty to others. Even if a suit is filed, the same very condition operates. Similarly the High Court while examining its jurisdiction under Article 226 and this Court under Article 32 -would insist upon the said condition being satisfied before ordering refund. Unless the claimant for refund establishes that he has not passed on the burden of duty to another, he would not be entitled to refund, whatever be the proceedings and whichever be the forum. Section 11B/ Section

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27 are constitutionally valid , as explained by us hereinbefore. They have to be applied and followed implicitly whereever they are applicable.

99. The discussion in the judgement yields the following propositions. We may forewarn that these propositions ae set out merely for the sake of convenient reference and are not supposed to be exhaustive. In case of any doubt or ambiguity in these propositions, reference must be had to the discussion and proposition in the body of judgement.

(i) to (ix) .....

(x) By virtue of sub-setion (3) to Section 11B of Central Excise Act, 1944, as amended by the aforesaid Amendment Act, and by virtue of the provisions contained in sub-section 3 to Section 27 of the Customs Act, 1962, as amended by the aforesaid Amendment Act,, all claims of refund (excepting those which arise as result of declaration of unconstitutionality of the provision whereunder the levy was created) have to be preferred and adjudicated only under the provisions of respective enactment. No suit for refund of duty is mantainable in that behalf. So far as jurisdiction of High Court under Article 226 of the Constitution, or this Court under Article 32 - is concerned it remains unaffected by the provisions of the Act. Even so, the court would while exercising the jurisdiction under the said articles, have regard to legislative intent manifested by the provisions of the Act. The writ petitions would naturally b considered and disposed of in the light of and in accordance with the provisions of Section 11B. This is for the reason that the power under Article 226 has to be exercised to effectuate the

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regime of law and not for abrogating it. Even while acting in exercise of the said constitutional power, the High Court cannot ignore the law nor can it over-ride it. The power under Article 226 is conceived to serve the ends of law and not to transgress them.

(xi) & (xii) ....."

3.0 Section 11BB of the said act, ibid, provides for interest from the date, three months from the date of filing the refund claim. Same is provided in the case of refund of pre-deposit, made under Section 35F of the Act, as per Section 35 FF, ibid.

3.0 Admittedly the present case is not the case of refund of pre-deposit, but of certain amounts which were deposited by the respondents during the course of investigation/ inquiry. Hence such a refund even if arising as result of order of CESTAT, has to be strictly governed as per the provisions of Section 11B and Section 11BB. This is the law laid down by the Apex Court in case of Mafatlal Industries.

4.0 We find that in case of refund under Income Tax Act, 1961, Hon'ble Apex Court has in case of Sandvik Asia Ltd [2006

(196) ELT 257 (SC)] has held as follows:

"In the present context, it is pertinent to refer to the Circular on Trade Notice issued by the Central Excise Department on the subject of refund of deposits made in terms of Section 35F of the Central Excise Act, 1944 and 129E of the Customs Act, 1962. The Circular is reproduced hereunder:-

"Refund/Return of deposits made under Section 35F of CEA, 1944 and Section 129E of Customs Act, 1962 - Clarifications The issue relating to refund of pre-deposit made during the pendency of appeal was discussed in the Board Meeting. It was decided that since the practice in the Department had all along been to consider such deposits as other than duty, such deposits should

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be returned in the event the appellant succeeds in appeal or the matter is remanded for fresh adjudication.

2. It would be pertinent to mention that the Revenue had recently filed a Special Leave Petition against Mumbai High Court's order in the matter of NELCO LTD, challenging the grant of interest on delayed refund of pre- deposit as to whether :

(i) the High Court is right in granting interest to the depositor since the law contained in Section 35F of the Act does in no way provide for any type of compensation in the event of an appellant finally succeeding in the appeal, and,

(ii) the refunds so claimed are covered under the provisions of Section 11B of the Act and are governed by the parameters applicable to the claim of refund of duty as the amount is deposited under Section 35F of the Central Excise Act, 1944. The Hon'ble Supreme Court vide its order dated 26-11-2001 dismissed the appeal. Even though the Apex Court did not spell out the reasons for dismissal, it can well be construed in the light of its earlier judgment in the case of Suvidhe Ltd. and Mahavir Aluminium that the law relating to refund of pre-deposit has become final.

3. In order to attain uniformity and to regulate such refunds it is clarified that refund applications under Section 11B(1) of the Central Excise Act, 1944 or under Section 27(1) of the Customs Act, 1962 need not be insisted upon. A simple letter from the person who has made such deposit, requesting the return of the amount, along with an attested Xerox copy of the order-in- appeal or CEGAT order consequent to which the deposit made becomes returnable and an attested Xerox copy of the Challan in Form TR6 evidencing the payment of the amount of such deposit, addressed to the concerned Assistant/Deputy Commissioner of Central Excise or Customs, as the case may be, will suffice for the purpose. All pending refund applications already made under the relevant provisions of the Indirect Tax Enactments for return of such deposits and which are pending

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with the authorities will also be treated as simple letters asking for return of the deposits, and will be processed as such. Similarly, bank guarantees executed in lieu of cash deposits shall also be returned.

4. The above instructions may be brought to the notice of the field formations with a request to comply with the directions and settle all the claims without any further delay. Any deviation and resultant liability to interest on delayed refunds shall be viewed strictly.

5. All the trade associations may be requested to bring the contents of this circular to the knowledge of their members and the trade in general.

6. Kindly acknowledge receipt. [Source : M.F.(D.R.) F.No. 275/37/2K-CX.8A, dated 2-1-2002]"

A close scrutiny of the contents of the Circular dated 2.1.2002 would disclose as to the modalities for return of pre-deposits. It again reiterated that in terms of the Supreme Court order such pre-deposit must be returned within 3 months from the date of the order passed by the Tribunal, Court or other fiscal authority unless there is a stay on the order of the fiscal authority, tribunal, court by a superior court. The Department has very clearly stated in the above circular that the delay beyond the period of 3 months in such cases will be viewed adversely and appropriate disciplinary action will be initiated against the concerned defaulting officers, a direction was also issued to all concerned to note that defaulter will entail a interest liability if such liability accrue by reason of any orders of the Tribunal/Court such orders will have to be complied with and it may be recoverable from the concerned

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officers. All the Commissioners were advised implementation of these instructions and ensure their implementation through a suitable monitoring mechanism. It is also specifically mentioned that the Commissioners under respective jurisdiction should be advised that similar matters pending in the High Courts must be withdrawn and compliance reported and that the Board has also decided to implement the orders passed by the Tribunal already passed for payment of interest and the interest payable shall be paid forthwith."

4.0 After taking the note of the draft circular reiterating the circular of 2002 placed before it, Supreme Court in Commissioner Of Central Excise, Hyderabad v. Itc Ltd. ., [(2005) 179 ELT 15 (SC)], interest was payable for the period commencing from three months after the final disposal of the matter till the date of refund. The Circular of 2004 is reproduced below:

"Circular No.802/35/2004-CX 8th December, 2004

F.No.387/5/2001-JC

Government of India Ministry of Finance (Department of Revenue) Central Board of Excise & Customs

Subject: Return of deposits made in terms of Section 35F of the Central Excise 1944 and Section 129E of the Customs Act, 1962.

Reference earlier instructions on the above subject and looking to the instances arising out of non-implementation of the judicial orders, the Board has reason to review and reiterate the earlier Circulars on the subject of non-implementation of orders of CESTAT or any Final Authority in relation to returning pre- deposits made as per directions of CESTAT or any other Final Authority in terms of Section 35F of the Central Excise Act, 1944 & Section 129E of the Customs Act, 1962. The Board has taken a strict view with regard to non-returning of such deposits.

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2. As we are all aware the CESTAT has in a number of such cases awarded interest on pre-deposits where its orders have not been implemented and the Department had challenged this and filed Civil Appeals in the Supreme Court.

3. The Board has noted the observations of the Hon'ble Supreme Court in its order dated 21.9.2004 and has decided that pre-deposits shall be returned within a period of three months of the disposal of the appeals in the assessee's favour.

4. Accordingly, the contents of the Circular No. 275/37/2000- CX.8A dated 02.01.2002, as to the modalities for return of the pre-deposits are reiterated. It is again reiterated that in terms of Hon'ble Supreme Court's order such pre-deposit must be returned within 3 months from the date of the order passed by the Appellate Tribunal/Court or other Final Authority unless there is a stay on the order of the Final Authority/CESTAT/Court, by a superior Court.

5. Delay beyond this period of three months in such cases will be viewed adversely and appropriate disciplinary action will be initiated against the concerned defaulting officers. All concerned are requested to note that default will entail an interest liability, if such liability accrues by reason of any orders of the CESTAT/Court, such orders will have to be complied with and it may be recoverable from the concerned officers.

6. All Commissioners may advise implementation of these instructions and ensure their implementation through a suitable monitoring mechanism. Field formation may be suitably informed. Copies of the instruction issued may be endorsed to this office for information.

7. Commissioners under your jurisdiction should be advised that similar matters pending in the High Courts must be withdrawn and compliance reported. The board has also decided to implement the CESTAT Orders already passed for payment of interest and the interest payable shall be paid forthwith.

8. This issues with the approval of Chairman/Member (L&J),

CBEC.

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9. Kindly acknowledge receipt.."

5.0 Same view was expressed by a three member bench of the Hon'ble Apex Court in case of Tata SSL [2007 (218) ELT 493 (SC)]. It is settled law as per the above decisions of the Apex Court, and the Circulars issued by the Board, that in case of refund of pre-deposit made as per the order of Courts/ Tribunals, the interest should have been granted within three months of date of the order.

6.0 Hon'ble jurisdictional High Court i.e. High Court of Punjab and Haryana has in case of Shreewood Products Pvt Ltd [2016

(44) STR 592 (P & H)] held as follows:

"7. Keeping in view the aforesaid facts and circumstances, in our opinion, the appellant herein is entitled to payment of interest @ 12% per annum for the period after three months till the refund was granted after passing of the order by the Tribunal on 2.5.2008. The questions, referred to above, are answered accordingly."

7.0 Similarly in case of Nino Chaka [2019 (9) TMI 1166], Hon'ble Delhi High Court held as follows:

"10. Moreover, it appears from the facts of the case that CESTAT order is dated 20.11.2003 and it has been ordered by CESTAT, New Delhi that if the amount is not returned to the petitioner by the respondents within a period of three months the interest shall be payable. The said period comes to an end on 21.02.2003. As the amount at Rs.28,76,578/- was not paid on 21.02.2003 by the respondents, the payment of interest starts till the actual date of payment. The amount was refunded by the respondents on 14.05.2004. Hence, at the highest, the petitioner is entitled to

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get interest at a reasonable rate of interest for the period running from 21.02.2003 to 13.05.2004.

11. In fact, the petitioner is in search of payment of interest from March/May, 1998 which cannot be granted because there is no provision for the payment of interest nor the aforesaid amount was deposited under any coercion or compulsion. Moreover, the aforesaid amount was deposited by the petitioner voluntarily and, that too, prior to the issuance of the show cause notice dated

04.04.2001.

12. Thus, we see no reason to entertain this writ petition for grant of interest from March/May, 1998 upon an amount at Rs.28,76,578/-. The principal amount has already been paid by the respondents to the petitioner on 13.05.2004. Thus, after three months period is over from the date of the order of the CESTAT (20.11.2003) till the actual payment of the amount (14.05.2004) i.e. for the period running from 21.11.2003 to 13.05.2004, the respondents are hereby directed to make the payment of interest upon the amount at Rs.28,76,578/- @ 6% p.a."

8.0 Same view has been expressed by Mumbai Bench of CESTAT, in the case Juhu Resorts [Final Order No A/86832/2019 dated 03.10.2019], after taking the note of Section 11B and 11BB in following words:

"5. A plain reading of aforesaid provisions makes it clear that the Appellants are entitled to interest from the date only after expiry of 3 months from the date of communication of the order i.e. in the present case from 17.03.2019. Consequently, the impugned order is modified and for calculation of the interest on the refund

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amount, the matter is remanded to the Adjudicating authority. Revenue's appeal is partly allowed."

9.0 In view of the discussions as above I do not see any merits in the impugned order and concur with the order proposed by the learned brother setting aside the same and allowing the appeal filed by revenue

(SANJIV SRIVASTAVA)

MEMBER (TECHNICAL)