M/S Unipack, Bhiwadi Unit vs. Additional Commissioner CGST

Facts

The petitioner, M/s Unipack, filed a writ petition challenging an order-in-original dated October 7, 2024, passed by the Assistant Commissioner, CGST, which rejected their claim for interest on an excess amount of Rs. 8,75,461/-. This amount represented Central Excise duty deposited in February and March 2013. The petitioner had initially deposited Rs. 26,10,164/- as Central Excise duty due to an investigation by the Anti-Evasion Wing, which found that the petitioner had incorrectly claimed small-scale exemption by not including turnover from its Delhi unit. After a protracted legal battle involving appeals to the Commissioner (Appeals) and the CESTAT, the matter was remanded. An order-in-original dated June 10, 2024, determined the excise duty liability to be Rs. 17,34,703/-, leading to a refund of Rs. 8,75,461/-. The petitioner then claimed interest on this refund amount, which was rejected by the impugned order.

Held

The Court held that the rejection of the petitioner's claim for interest on the excess excise duty amount of Rs. 8,75,461/- was unsustainable. The Court reasoned that the collection and retention of excess excise duty by the respondents were without the authority of law. Citing principles of social justice and equity, the Court found that the petitioner, having paid the amount from its own resources and been deprived of its use for over eleven and a half years, was entitled to compensation. The Court referred to judgments like Swastik Metals, Redihot Electricals, and Mafatlal Industries Ltd., and also drew parallels from Supreme Court decisions concerning compensation for delayed payments in income tax matters (Sandvik Asia Ltd.). The Court concluded that the respondents were solely responsible for the gross delay in releasing the amount and thus could not refuse compensation. The impugned order was quashed to the extent it denied the claim for interest. The Court directed the respondents to refund the excess excise duty amount of Rs. 8,75,461/- with interest at the rate of 12% per annum, calculated from the date of actual payment of each installment until the date of refund, to be paid within six weeks.

Key Issues

1. Whether the petitioner is legally entitled to claim interest on the excess excise duty amount of Rs. 8,75,461/- deposited by them in 2013 and subsequently refunded. Petitioner's Arguments: The petitioner argued that the refusal to grant interest is illegal and arbitrary. They contended that they are entitled to compensation in the form of interest from the date of collection until the date of actual payment. They relied on judgments from the Rajasthan High Court (Swastik Metals), Delhi High Court (Redihot Electricals), and the Supreme Court (Mafatlal Industries Ltd.) to support their claim that Section 11BB of the Central Excise Act, 1944, should not be an impediment to awarding interest. Respondents' Arguments: The respondents raised preliminary objections regarding the maintainability of the writ petition, arguing that the petitioner had an alternative statutory remedy of appeal before the Joint/Additional Commissioner, CGST (Appeals). They also relied on various judgments in their reply concerning the maintainability of the writ petition.