2012 (4) TMI 497 - AT - Central Excise

Interest on refund claim - Section 11BB - Held that - refund claim was held admissible by the Commissioner (Appeals) and accordingly the refund was effected on the dates aforementioned. As per the explanation, the appellate Commissioner s order sanctioning refund should be deemed to be an order passed under sub-section (2) of Section 11B, which would mean that the date on which the original authority first rejected the refund claim (8-5-1998) should be deemed to be the date of grant of refund claim. This legal position which was overlooked by the original authority in the subsequent proceedings was correctly understood by the learned Commissioner (Appeals) and accordingly interest was ordered to be paid. In the result, the order passed by the learned Commissioner (Appeals) for payment of interest under Section 11BB of the Act to the respondent on the amount of duty refunded to them is liable to be sustained - Decided against Revenue.

Summary

Issues:
Appeal against order for payment of interest under Section 11BB of the Central Excise Act on a duty refunded to the respondent.

Analysis:
The appeal filed by the department challenges an order for the payment of interest under Section 11BB of the Central Excise Act on a duty refunded to the respondent. The respondent initially claimed a refund of duty based on an order passed by the Commissioner of Customs and Central Excise, which was accepted by the department. However, the refund claim was rejected by the original authority, leading to an appeal to the Commissioner (Appeals) who allowed the appeal and directed the refund. The refund was then partially disbursed on different dates, but no interest was paid. Subsequently, the respondent filed a claim for interest under Section 11BB, which was also rejected initially. The Commissioner (Appeals) then passed an order in favor of the respondent, directing the payment of interest in accordance with the explanation to Section 11BB. The department's appeal challenges this order.

The key contention revolves around the interpretation of Section 11BB by the respondent, who argued that no interest was due. The appellant relied on precedents suggesting that interest should be paid three months from the Tribunal's order. However, the Tribunal noted that the respondent's entitlement to refund stemmed from the Commissioner's order in 1997, accepted by the department. The explanation to Section 11BB states that an order of refund by the Commissioner (Appeals) should be deemed as an order under Section 11B. Therefore, the date of the original rejection of the refund claim should be considered as the date of grant of the refund. The Commissioner (Appeals) correctly understood this legal position, ordering the payment of interest. Consequently, the Tribunal upheld the order for interest payment on the refunded duty amount, specifying the periods for which interest is due on the two refund amounts.

In conclusion, the Tribunal rejected the department's appeal and upheld the Commissioner (Appeals)'s order for interest payment under Section 11BB. The original authority is tasked with quantifying and disbursing the interest to the respondent accordingly, based on the specified periods for each refunded amount.