2019 (8) TMI 1024 - AT - Service Tax

Interest on delayed refund - section 11BB of FA - HELD THAT - A plain reading of Sec.11BB also shows that interest has to be paid if the refund is not made within three months from the date of application. It does not say within three months from the date of sanction of refund under Sub-Section (2) of Sec.11B as held by the first appellate authority. The appellant is entitled to interest from three months after the date of application till the date they were paid interest. Appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Refusal of interest under Sec.11BB of the Central Excise Act by the first appellate authority.

Analysis:
The appeal in question was filed against Order-in-Appeal No. VIZ-EXCUS-001-APP- 023-18-19 dated 27.04.2018. The appellant had initially filed a refund claim on 31.07.2014, which was rejected by the lower authority and the first appellate authority. However, upon appeal, the refund was sanctioned by the bench through Final Order No. A/30425-30428/2017 dated 22.03.2017. Subsequently, the refund was paid on 05.05.2017, but the interest under Sec.11BB of the Central Excise Act, as applied to service tax by Sec.3 of the Finance Act, 1994, was not paid to the appellant. The first appellate authority denied the appellant's claim for interest, stating that since the refund was paid within three months from the date of the final order of the CESTAT, no interest was payable.

The issue of interest payment in case of a delay in refund payment has been settled by the Hon'ble Supreme Court in the case of Ranbaxy Laboratories Ltd (in Civil Appeal No. 637/2009 & 3088/2010). The Supreme Court held that interest must be paid under Sec.11BB in situations where there is a delay in refund payment. This judgment has been consistently followed by the Tribunal, including the bench in question. Section 11BB clearly mandates the payment of interest if the refund is not made within three months from the date of the application, not from the date of the sanction of the refund under Sub-Section (2) of Sec.11B, as incorrectly interpreted by the first appellate authority. Therefore, the appellant is entitled to interest from three months after the date of the application until the date when the interest was actually paid. Consequently, the impugned order was set aside, and the appeal was allowed.

In conclusion, the judgment of the Appellate Tribunal CESTAT Hyderabad, delivered by Member (Technical) P.V. Subba Rao, rectified the error made by the first appellate authority in denying interest under Sec.11BB of the Central Excise Act to the appellant. The decision reaffirmed the legal position established by the Hon'ble Supreme Court and clarified the correct interpretation of the relevant provisions, ensuring that the appellant received the entitled interest amount for the delay in refund payment.