2014 (5) TMI 59 - HC - Central Excise

Interest on refund claim - Section 11-BB - Held that - A bare perusal of Section 11BB of the Act reveals that the payment of interest is not depended on the claim by the party. It is automatic. In case if refund is not paid within three months from the date of receipt of the application the authority concerned is under obligation to pay the interest. In Section 11BB of the Act the word used is there shall be paid to the applicant. It means that it is not discretionary and has to pay. The payment of interest is statutory and automatically. The waiver of the interest by the party has no relevance and on the said ground payment of interest can not be denied. Petitioner is entitled for the interest under Section 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. Having regard to the facts and circumstances of the present case we are not impressed with the argument of learned counsel for the petitioner that the petitioner is entitled for interest on interest - Decided partly in favour of assessee.

Summary

Issues involved:
Claim for refund along with interest under Section 11BB of the Income Tax Act, 1961; Denial of interest on pending refund claim; Statutory entitlement to interest under Section 11BB; Effect of waiver on claiming interest; Interpretation of Section 11BB and relevant case laws.

Analysis:
The petition sought direction for refund claims with interest under Section 11BB of the Income Tax Act. The petitioner filed refund claims in different years, some allowed, others pending. The denial of interest on pending claims was based on a letter stating waiver of interest, which the petitioner argued cannot override statutory entitlement to interest under Section 11BB. The petitioner cited Circular no.670/61/2002-CX emphasizing automatic payment of interest beyond three months. The Apex Court's decision in Ranbaxy Laboratories Ltd. Vs. Union of India clarified that interest under Section 11BB is payable if refund is not made within three months of the application. The court noted that waiver by the party does not affect the automatic nature of interest payment.

The court analyzed Section 11BB, emphasizing the mandatory nature of interest payment, not dependent on party's claim. Circular no.670/61/2002-CX reiterated the automatic application of interest after three months. The court referred to the Ranbaxy case, highlighting that interest becomes payable if refund is delayed beyond three months from the application. The court rejected the petitioner's argument for interest on interest, stating entitlement to interest under Section 11BB if refund is delayed beyond three months.

In conclusion, the court allowed the petition in part, directing the authority to calculate and pay interest under Section 11BB within a specified timeline. The judgment clarified the statutory obligation to pay interest under Section 11BB, irrespective of party's waiver, and emphasized the automatic nature of interest payment after three months. The court's decision aligned with legal provisions and relevant case laws, ensuring the petitioner's entitlement to interest on delayed refunds.