2012 (2) TMI 78 - HC - Central Excise

Interest on Refund - Interest of ₹ 1.36 Crores rejected on the ground as was not admissible under Section 11BB of Excise Act - Date of refund - Held That - In view of Ranbaxy laboratories (2011 -TMI - 206520 - Supreme Court of India), section 11BB commences from the expiry of three months from the date of receipt of the application for refund under Section 11B(1) and not on the expiry of the said period from the date on which an order for refund is made.

Summary

Issues:
1. Rebate claims rejection and subsequent adjudication
2. Entitlement to interest on rebate claims
3. Interpretation of Section 11BB of the Central Excise Act 1944

Issue 1: Rebate claims rejection and subsequent adjudication
The Respondent had filed 191 rebate claims under Rule 18 of the Central Excise Rules 2002, totaling Rs.17.15 Crores between April 2006 and November 2006. A notice to show cause was issued in March 2007 questioning the duty paid nature of the exported goods. The Assistant Commissioner rejected the rebate claims in April 2007, but a Division Bench of the High Court set aside this order due to bias. The show cause notice was dropped in December 2007, and the rebate claims were subsequently sanctioned without interest by the Assistant Commissioner. A fresh notice to show cause was issued in May 2008 regarding interest on the claims, which was initially rejected but later allowed by the Commissioner of Central Excise (Appeals) in July 2008. The Government's revision application was dismissed.

Issue 2: Entitlement to interest on rebate claims
The Petitioner argued that since the entitlement to rebate was confirmed only in December 2007, and the claims were sanctioned within three months, no interest was payable. Conversely, the Respondent relied on the Supreme Court judgment in Ranbaxy Laboratories Ltd. v. Union of India, asserting that no interference was warranted under Article 226 of the Constitution.

Issue 3: Interpretation of Section 11BB of the Central Excise Act 1944
The Supreme Court in the Ranbaxy case clarified Section 11BB, stating that interest becomes payable if the duty is not refunded within three months of the application submission. The explanation to Section 11BB deems an order for refund by an appellate authority or court as an order under Section 11B(2). Therefore, interest accrues after three months from the application submission date. The judgment established that interest liability under Section 11BB starts after three months from the application's receipt, not from the order date. Consequently, the order granting interest by the Commissioner (Appeals) and the revisional authority was upheld, dismissing the Petition.