2008 (7) TMI 94 - HC - Central Excise

Claim for interest u/s 11BB on the delayed refund - revenue plea is that as the refund was made within the period of 3 months from the date of the order passed by the appellate authority, no interest is payable held that the interest is payable u/s 11BB on expiry of period of 3 months from the date of receipt of the application and that Explanation appearing below Section 11BB does not have any connection with the date from which interest u/s 11BB becomes payable revenue appeal rejected

Summary

Issues:
1. Refund of excise duty rejection by authorities.
2. Claim for interest under Section 11BB of the Act on the refunded amount.

Analysis:
1. The respondent, a paper manufacturer, filed multiple refund applications under Section 11B of the Central Excise Act for excise duty paid. The initial claims were rejected by the Assistant Commissioner and Deputy Commissioner. However, the Commissioner (Appeals) later allowed the refund claims, leading to a subsequent appeal by the department. The Tribunal held that refunds must be made within three months from the application date, not the order date, to avoid interest payment under Section 11BB of the Act.

2. The main issue raised in the appeal was whether interest under Section 11BB is payable only when a refund order is issued by the Assistant Commissioner or Deputy Commissioner. The department argued that interest is not applicable unless these specific authorities order the refund. Conversely, the respondent contended that interest is payable even if the refund is ordered by higher authorities like the appellate authority or Tribunal, citing the explanation under Section 11BB.

3. Section 11B outlines the procedure for refund applications, requiring submission of necessary documents to the Assistant Commissioner or Deputy Commissioner. Sub-section (2) empowers these authorities to determine refund eligibility after an inquiry. Section 11BB deals with interest on delayed refunds, specifying that if a refund is not issued within three months from the application date, interest must be paid. The explanation clarifies that orders from higher authorities are deemed as orders under sub-section (2) of Section 11B for interest calculation purposes.

4. The High Court emphasized that interest under Section 11BB becomes payable after three months from the application date if the refund is delayed, irrespective of the authority issuing the refund order. The explanation's purpose is to create a legal fiction for higher authority orders under sub-section (2) of Section 11B, not to impact the interest payment timeline. The Court rejected the appeal, affirming that interest accrues after the three-month period from the application date, as per the clear legal provisions and precedents cited.

This detailed analysis of the judgment highlights the key issues of refund rejection and interest payment under Section 11BB, providing a comprehensive understanding of the legal reasoning and conclusions reached by the High Court in the case.