When the Revenue wrongfully collects and withholds funds from an assessee, they are obligated to compensate the assessee with interest on the delayed refund, even in the absence of a specific statutory provision, to prevent unfair and discriminatory treatment.

JUDGMENT:

(Per the Hon’ble Sri Justice Suddala Chalapathi Rao)

1. The instant appeal has been filed against the common final order Nos.576 & 577/2011, dt.17.08.2011, passed by the Customs, Excise & Service Tax Appellate Tribunal, South Zone Bench at Bangalore (for short ‘CESTAT’) in Appeal No.E/1124/2006.

2. The brief facts of the case are that the appellant is a company engaged in the manufacture and export of bulk drugs; that in the middle of January, 1997, the jurisdictional Central Excise Superintendent, directed the appellant to pay Rs.31,52,256/- alleging that the appellant had violated the Customs Notification No.203/92, dt.19.05.1992 and was therefore, liable to pay interest as per the amnesty scheme announced by the Director of Drawback vide letter DOF. No.605/140/95-DBK, dt.03.01.1997. As the Superintendent threatened to stop the export clearances, if the said direction was not complied with on or before 31.01.1997, the appellant was forced to deposit Rs.31,52,256/- on 31.01.1997 under protest. Subsequently, as the appellant was not liable to pay the said amount, it had filed a refund claim to the Jurisdictional Assistant Commissioner of Central Excise on 02.06.1997 and the Assistant Commissioner refused to refund the said amount stating that the appellant was liable to pay the said amount as interest for violating the conditions of Customs Notification No.213/92, dt.19.05.1992.

3. Assailing the said order, the appellant had filed an appeal before the learned CESTAT by raising a question of law and fact as to whether the appellant violated the conditions envisaged under Notification, No.203/1992-CUS, and whether the appellant was liable to pay the said amount as interest to the Department for violation of the said notification.

4. The learned CESTAT vide Final Order No.548/2006, dt.09.03.2006 categorically held that the appellant is not bound by the Customs Notification No.203/92, dt.19.05.1992 and that there are no violations committed by the appellant and further held that the amnesty scheme announced by the Director of Drawback will not apply to the appellant, and the learned CESTAT concluded that the appellant was not liable to pay any amount to the Department and directed the Department to refund the said amount to the appellant in accordance with law with an observation that if the amount is not paid within three (03) months from the date of receipt of the application for refund as and when made by the appellant, under Section 11BB of Central Excise Act, 1944 (for short ‘the Act, 1944’), the appellant becomes entitled to interest for the said period.

5. Further, pursuant to the learned CESTAT’s Final Order No.548/2006, though the appellant made refund application on 02.06.1997, the Assistant Commissioner refunded the amount of Rs.31,52,256/- only on 02.07.2006, and the Department refused to pay interest for the delay of refund for more than nine years from the date the refund application, i.e., from 02.06.1997 to 02.07.2006, stating that the said amount originally was collected as “interest” and not as “duty,” and therefore, no interest could be granted on such amount, as it would amount to paying interest on interest.

6. Aggrieved by the refusal of payment of interest, the appellant filed an appeal before the Commissioner of Central Excise (Appeals) and the Commissioner, vide order dt.31.10.2006, rejected the claim for interest to the appellant.

7. Aggrieved by the refusal order, dt.31.10.2006, the appellant then filed a further appeal before the le