2014 (4) TMI 1014 - HC - Central Excise

Claim of refund along with interest u/s 11BB of the Act Held that - Relying upon circular no.670/61/2002-CX, dated 01.10.2002 and Ranbaxy Laboratories Ltd. Vs. Union of India 2011 (10) TMI 16 - Supreme Court of India - Section 11BB of the Act comes into play only after an order for refund is being made - interest u/s 11BB of the Act becomes payable, if on an expiry of a period of three months from the date of receipt of the application for refund, the amount claimed is still not refunded - the only interpretation of Section 11BB that can be arrived at is that interest under the section becomes payable on the expiry of a period of three months from the date of receipt of the application under sub-section (1) of Section 11B of the Act and that the said Explanation does not have any bearing or connection with the date from which interest under Section 11BB of the Act becomes payable - The assessee is entitled for the interest u/s 11BB of the Act on the refunded amount, if the amount has been refunded after three months from the date of receipt of the application, but is not entitled for interest on interest the Authority is directed to calculate interest u/s 11BB of the Act Decided partly in favour of Assessee.

Summary

Issues:
Seeking direction for refund claims along with interest under Section 11-BB of the Income Tax Act, 1961 (Central Excise Act, 1944); Denial of interest on pending refund claim due to waiver claim by the petitioner; Discrepancy in refund claims and issuance of show cause notices; Entitlement to interest under Section 11BB of the Act despite waiver claim by the petitioner; Liability for interest on interest due to illegal withholding of interest.

Analysis:
The petitioner filed refund claims in various years under Section 11-BB of the Income Tax Act, 1961 (Central Excise Act, 1944). Despite some claims being allowed, interest on pending refund claims was denied based on a letter of waiver by the petitioner. The petitioner argued that interest under Section 11BB is statutory and automatic, not dependent on the claim, citing circulars and legal precedents. The court noted that Section 11BB mandates payment of interest if refund is not made within three months, regardless of waiver claims. The Apex Court's interpretation clarified that interest becomes payable after three months from the application date, irrespective of the order for refund.

The court emphasized that interest under Section 11BB is automatic and not discretionary, rejecting the respondent's argument of waiver by the petitioner. The circular highlighted that officers must ensure timely refund processing to avoid interest liability. Legal precedents supported the petitioner's claim for interest, emphasizing the statutory nature of interest payment. The court held that the petitioner is entitled to interest under Section 11BB if refunds are delayed beyond three months, dismissing the argument for interest on interest.

In conclusion, the court partially allowed the writ petition, directing the authority to calculate and pay the interest under Section 11BB within a specified timeframe. The judgment clarified the statutory obligation to pay interest on delayed refunds, irrespective of waiver claims, and emphasized the automatic nature of interest under Section 11BB. The decision aligned with legal provisions and established precedents, ensuring timely and fair refund processes under the Act.