2021 (8) TMI 168 - AT - Central Excise

Interest on delayed refund - Relevant date - interest claimed denied on the ground that refund has being sanctioned within 3 months of the date of refund application - whether 16.11.2017 is the date under section 11 B of Central Excise Act, 1944 or the respective dates of the applications filed in 2015-16, as far as liability of Department to give interest is concerned? - Section 11BB of Central Excise Act, 1944 - HELD THAT - Apparently, the order of Commissioner (Appeals) is much beyond the date of the application of the appellant as was filed under Section 11B of the Act. Hence, it is mandatory for the Department to sanction interest along with the sanctioned refund claim - The ground as taken by the Commissioner (Appeals), for rejecting the sanctioning of interest is observed to be highly irrational as pursuant to the Order-in-Original dated 24.01.2018 there had been a written request of appellant dated 23.04.2018 praying for sanction of interest. Appeal allowed.

Summary

Issues involved:
1. Refusal to sanction interest on a refunded amount.
2. Interpretation of Section 11BB of the Central Excise Act, 1944 regarding interest on delayed refunds.

Analysis:

Issue 1: Refusal to sanction interest on a refunded amount
The appeal arose from the rejection of an appellant's request for interest on a refunded amount. The appellant, engaged in the manufacture of Pan Masala, had filed abatement claims of Central Excise duty, which were initially rejected but later sanctioned by the Commissioner (Appeals). The appellant requested interest on the refunded amount, which was denied by the Department on the grounds of timely refund application. The appellant contended that interest liability accrues from the date of the original application, not the date of final sanction. The Department argued that since the refund was sanctioned within three months of the application, there was no obligation to pay interest. The Tribunal noted the discrepancy and analyzed the relevant legal provisions.

Issue 2: Interpretation of Section 11BB of the Central Excise Act
The Tribunal delved into the interpretation of Section 11BB of the Central Excise Act, which governs interest on delayed refunds. The section mandates payment of interest if a duty ordered to be refunded is not repaid within three months from the date of the refund application. The Tribunal emphasized that interest liability commences from the date of the application under Section 11B. Citing legal precedents, including judgments from various High Courts, the Tribunal clarified that interest becomes payable after three months from the application date, irrespective of the final refund order date. The Tribunal highlighted that the Department's refusal to sanction interest was unjustifiable, especially when the appellant had requested interest in writing post-refund sanction. Relying on legal principles and precedents, the Tribunal concluded that the Department was obligated to pay interest along with the refunded amount, overturning the rejection of interest by the Commissioner (Appeals).

In conclusion, the Tribunal allowed the appeal, setting aside the order that denied interest on the refunded amount. The judgment underscored the statutory obligation under Section 11BB to pay interest on delayed refunds, emphasizing the application date as the trigger for interest accrual. The detailed analysis of legal provisions and precedents provided clarity on the matter, ensuring a fair and just resolution in favor of the appellant.