2012 (12) TMI 967 - CGOVT - Central Excise

Denial of rebate claim - benefit of exemption under Notification No. 56/2002-C.E. dated 14-11-2002 - Interest on delayed refund claim - Held that - Rule 18 of Central Excise Rules 2002 was amended retrospectively w.e.f. 1-3-2002 to 7-12-2006 vide Section 88 of Finance Act 2008 allowing rebate of duty paid on excisable exported goods for that portion of duty for which refund has been granted in terms of area based exemption notification to the manufacturer. The said amendment in Rule 18 make such rebate claims admissible during the period 1-3-2002 to 7-12-2006. Government observes that the retrospective validation of admissibility of rebate claims made the claimant entitled for said rebate claim during the relevant period. The said amendment has not put any bar on payment of interest in terms of Section 11BB for delayed payment of said refund claims. So the time limit provided under Section 11BB for the purpose of computing interest liability has to be adhered to. Interest liability arises when any duty ordered to be refunded under Section 11B(2) is not refunded within three months from the date of receipt of application under Section 11B(1). Since the said amendment has not put any restriction on the payment of interest in terms of Section 11BB the argument of department that interest will arise after three months of amendment does not hold good. - interest under Section 11BB becomes payable on the expiry of three months from the date of receipt of the application under sub-section (1) of Section 11B of the Act and any explanation/reasons due to which the delay occurred will not have any bearing upon the said legal position. Therefore Government finds no infirmity in the impugned order-in-appeal and upholds the same. - Decided against Revenue.

Issues Involved:
1. Entitlement to rebate claims under Notification No. 56/2002-C.E.
2. Delay in sanctioning rebate claims and entitlement to interest under Section 11BB of Central Excise Act, 1944.

Issue-wise Detailed Analysis:

1. Entitlement to Rebate Claims under Notification No. 56/2002-C.E.:

The respondents, M/s. Dujodwala Resins & Terpenes Ltd., submitted rebate claims for duty paid on exported goods, which were initially not sanctioned because they were availing exemption benefits under Notification No. 56/2002-C.E. The rebate claims were sanctioned only after the enactment of the Finance Bill, 2008, which amended Rule 18 of the Central Excise Rules, 2002, with retrospective effect. This amendment allowed the rebate of duty paid on excisable goods cleared for export, even if the refund had been granted under certain notifications issued under Section 5A of the Central Excise Act, 1944. The original authority observed that the respondents became eligible for the rebate only after the enactment of the Finance Bill, 2008, and hence, the rebate was sanctioned within a month of the enactment.

2. Delay in Sanctioning Rebate Claims and Entitlement to Interest under Section 11BB:

The respondents argued that they were entitled to interest on the delayed rebate claims as per Section 11BB of the Central Excise Act, 1944. The Commissioner (Appeals) set aside the original order and allowed the respondents' appeal, observing that the refund must be disbursed within three months from the date of application submission. The department contested this, arguing that the rebate claims became legally payable only after the amendment of Rule 18 by the Finance Act, 2008, and hence, there was no delay in sanctioning the rebate.

The Government reviewed the case records and noted that the rebate claims were submitted on 20-11-2006 and 19-1-2007, respectively. The claims were not sanctioned initially due to the exemption under Notification No. 56/2002-C.E. The retrospective amendment of Rule 18 validated the rebate claims, making them admissible for the period from 1-3-2002 to 7-12-2006. The Government observed that the amendment did not put any bar on the payment of interest in terms of Section 11BB for delayed payment of refund claims.

The Supreme Court judgment in Ranbaxy Laboratories Ltd. v. UOI clarified that interest under Section 11BB becomes payable on the expiry of three months from the date of receipt of the application for refund, regardless of when the order for refund is made. This principle was reiterated in another case involving M/s. Jindal Drugs, where the Bombay High Court upheld that interest is payable after three months from the date of receipt of the refund/rebate application.

The Government concluded that the department's argument that interest would arise only after three months from the amendment does not hold good. The liability to pay interest under Section 11BB commences from the expiry of three months from the date of receipt of the application for refund under Section 11B(1) of the Act. Therefore, the Government found no infirmity in the impugned order-in-appeal and upheld the same, rejecting the revision application as devoid of merit.

Conclusion:

The revision application was rejected, and it was ordered that the respondents are entitled to interest under Section 11BB of the Central Excise Act, 1944, for the delayed sanctioning of rebate claims. The liability to pay interest commences from the expiry of three months from the date of receipt of the application for refund.

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