The Punjab And Haryana High Court has held that Rule 8(3) ultra vires to section 11AB(1) of Central Excise Act, 1944 and directed the dept. to refund excessive interest along with the 6% interest.
The bench of Justice Sanjeev Prakash Sharma and Justice Sanjay Vashisth has observed that an amount received on the basis of provisions of law, which has been declared ultra vires has to be treated as in contravention of provision of Article 265 of the Constitution of India and the same has to be refunded.
Background – Rule 8(3) ultra vires to section 11AB(1) of Central Excise Act, 1944
The petitioner/assessee is engaged in manufacturing of Duplex Board. The petitioner has sought to recover a sum of Rs.3,66,649/- which was paid by the petitioner to the Department as interest in excess of actual interest liability.
As per Rule 8 of the Central Excise Rules, 2002, the petitioner deposited additional interest amount on account of delayed payment of excise duty.
However, the Rajasthan High Court in case of Lucid Calloids Ltd. Vs. Union of India held that Sub-Rule (3) of Rule 8 is ultra vires to Section 11AB(1) of the Central Excise Act, 1944, therefore, interest cannot be charged more than 2% per month. The petitioner moved application before the respondents-Department seeking refund of the excess interest amount.
The application was rejected being time barred in terms of Section 11B of the Act. Thereafter, appeal against the order was allowed. The Department preferred appeal against the said order and the same came to be decided by the Customs Excise and Service Tax Appellate Tribunal (CESTAT) in favour of the department holding the application to be time barred.
Arguments
The department contended that the refund application was moved under Section 11B. Therefore, the petitioner is bound by the provisions of law for the purpose of refund and after having availed the said remedy, it cannot be allowed to take up the remedy under Article 226 of the Constitution of India specifically for the same relief.
The department argued that it is not required to refund the amount, which was deposited by the petitioner at the relevant time in terms of their own self assessment.
The assessee contended that once a provision of law has been declared ultra vires it would mean that the same was never existing on the statute, hence, if any person has acted on the basis of an ultra vires Rule or Provision under an Act, such action giving advantage to any of the parties, will have to be recalled. It is akin to a situation
which may arise and considered in terms of Section 144 C.P.C.
Conclusion
The court held that when a person deposits a penalty more than required in terms of any Rule which is ultimately declared as ultra vires, the said amount will have to be returned back to him. It may be at his request or
the department may take initiative and return it back.
The court held that the amount kept by the department as an excess amount of Rs.3,66,649/- was unjustified and the Department ought to have refunded it back. The application for refund moved by the petitioner has wrongly been treated as an application under Section 1B and should have been treated as a simple application for refund in terms of the provisions having been declared ultra vires, if the amount therefore has to be returned to the petitioner.
The court directed the department to refund the amount along with 6% interest per annum from the date the same was deposited erroneously.
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Case Details
Case Title: M/s Durga Board and Paper Industries Limited V/S Union of India and another
Case No.: CWP-19918-2013(O&M)
Date: 04.11.2024
Counsel For Petitioner: Deepak Aggarwal
Counsel For Respondent: Saurabh Goel
