2016 (1) TMI 1198 - AT - Service Tax

Interest on refund sanctioned - unjust enrichment - Held that - Section 11BB of Central Excise Act, 1944 is unambiguously clear that non-sanction of refund within three months of filing of claim will set the interest clock ticking. Mere pendency of any appellate / revisionary proceedings cannot justify non-sanction of such refunds. The law does not acknowledge recoveries to any such excuse or loopholes. Section 11BB is intended to ensure accountability on the part of revenue officials. To place the legally provided for interest on the backburner for any reason whatsoever would be tantamount to defying legislative intent. The tax authorities were determined not to grant the refund to the appellant. Withholding of interest will, therefore, only serve to encourage irresponsibility and non-responsiveness on the part of tax authorities - original authority is directed to release the interest due till date of payment of refund immediately on receipt of this order - appeal allowed - decided in favor of appellant.

Summary

Issues involved:
Refund of tax paid on 'freight charges' under retrospective amendment of Finance Act, 2000; unjust enrichment; denial of interest on refund claim; interpretation of Section 11BB of Central Excise Act, 1944.

Analysis:
The judgment revolves around the appeal by M/s Raymond Ltd seeking a refund of tax paid on 'freight charges' under a retrospective amendment of the Finance Act, 2000. The appellant had paid tax amounting to Rs. 24,86,657/- and subsequently sought a refund based on an adjudication order that dropped proceedings. After a series of appeals and reviews, the Tribunal concluded that the original notice was not sustainable, affirming the non-leviability of tax.

The refund claim was initially allowed but the sanctioned amount was transferred to the Fund due to 'unjust enrichment.' However, this decision was overturned by the first appellate authority, leading to the refund being granted to M/s Raymond Ltd. Nevertheless, the claim for interest was not approved, prompting the appellant to challenge this denial before the Tribunal.

The Tribunal, after hearing both sides, emphasized the importance of Section 11BB of the Central Excise Act, 1944, which mandates the sanction of refunds within three months of the claim being filed. The Tribunal clarified that the mere pendency of appellate or revisionary proceedings cannot justify withholding refunds, as this would go against the legislative intent of ensuring accountability on the part of revenue officials.

Additionally, the Tribunal criticized the authorities for resorting to the bar of unjust enrichment, stating that such actions only discourage responsibility and responsiveness. The judgment underscored that the duty was identified as wrongly collected back in 2004, and the revenue had no valid grounds to withhold the refund. Consequently, the Tribunal allowed the appeal, directing the original authority to release the interest due immediately upon receipt of the order, in compliance with Section 11BB.

In conclusion, the Tribunal's decision to allow the appeal and enforce the release of interest on the refund highlights the significance of adhering to statutory provisions and ensuring accountability in tax matters.