2021 (5) TMI 738 - HC - Central Excise

Grant of interest on refund amount - relevant time for calculation of interest - calculation of interest after expiry of three months from the respective dates of application till the date of actual refund under section 11BB of the Central Excise Act, 1944 read with section 83 of the Finance Act, 1994 - HELD THAT - Sub-section (1) of section 11B says that any person claiming refund of any duty of excise and interest, if any, paid on such duty may make an application for refund of such duty and interest, if any, paid on such duty to the Assistant Commissioner of Central Excise or Deputy Commissioner of Central Excise before the expiry of one year from the relevant date in such form and in such manner as may be prescribed. The application shall be accompanied by documentary and other evidence in support of the claim. Sub-section (2) of section 11B provides that upon receipt of any such application if the Assistant Commissioner of Central Excise or Deputy Commissioner of Central Excise is satisfied that the whole or any part of the duty of excise and interest, if any, paid on such duty by the applicant is refundable, he may make an order accordingly whereafter the amount is to be refunded. From a reading of section 11BB, it is evident that if any duty ordered to be refunded under sub-section (2) of section 11B to any applicant is not refunded within three months from the date of receipt of application under sub-section (1) of section 11B, there shall be paid to that applicant interest at such rate which is not below 5% and not above 30% per annum as may be fixed by the central government, by notification in the Official Gazette. The interest will be calculated for the period commencing from the date immediately after expiry of three months from the date of receipt of such application till the date of refund of such duty. Petitioner would be entitled to interest under section 11BB of the Central Excise Act, 1944 on the amounts refunded to it. Respondent Nos.2 and 3 shall work out the interest amount payable to the petitioner in respect of the refund claims for the relevant periods which shall be paid to the petitioner within three months from the date of receipt of a copy of this judgment and order - Petition allowed.

Issues Involved:
1. Entitlement to interest on delayed refund under Section 11BB of the Central Excise Act, 1944.
2. Applicability of Section 11BB to service tax refunds.
3. Whether the delay in processing refunds was intentional or unintentional.
4. Availability of alternative remedy for the petitioner.

Detailed Analysis:

1. Entitlement to Interest on Delayed Refund:
The petitioner sought a direction for the respondents to grant interest on the refund amount due to delays beyond three months from the application date, as per Section 11BB of the Central Excise Act, 1944. The court noted that Section 11BB mandates interest payment if the refund is not processed within three months from the application date. The petitioner argued that interest under Section 11BB is mandatory for all 19 refund applications as the refunds were delayed beyond three months from the application dates. The court concurred, emphasizing that the provision does not differentiate between intentional and unintentional delays. The Supreme Court's decision in Ranbaxy Laboratories Limited vs. Union of India was cited, which clarified that interest under Section 11BB becomes payable after three months from the application date, irrespective of when the refund order is made.

2. Applicability of Section 11BB to Service Tax Refunds:
The court highlighted that Section 83 of the Finance Act, 1994 makes provisions of certain sections of the Central Excise Act, including Sections 11B and 11BB, applicable to service tax. This means the rules governing excise duty refunds also apply to service tax refunds. The petitioner’s claim for interest on delayed service tax refunds was thus valid under these provisions.

3. Intentional vs. Unintentional Delay:
The respondents argued that there was no intentional delay in processing the refunds, attributing delays to procedural reasons and organizational restructuring due to the implementation of GST. However, the court pointed out that Section 11BB does not consider the nature of the delay—whether intentional or unintentional. The provision mandates interest payment on delayed refunds beyond three months from the application date, regardless of the reasons for the delay.

4. Availability of Alternative Remedy:
The respondents contended that the petitioner had an alternative remedy of filing an appeal before the Commissioner (Appeals) against the orders declining interest. The court, however, proceeded to address the merits of the case, emphasizing the statutory obligation to pay interest on delayed refunds under Section 11BB.

Conclusion:
The court concluded that the petitioner was entitled to interest on the delayed refunds under Section 11BB of the Central Excise Act, 1944. The respondents were directed to calculate and pay the interest amount within three months from the receipt of the judgment. The writ petition was allowed, but no order as to costs was made.

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