2007 (12) TMI 116 - AT - Central Excise

Exporters of readymade garments refund claim filed for credit paid in OIO refund claim was returned with a direction to produce original documents along with claim again assessee filed refund claim in which refund was sanctioned - date of filing of the refund claim cannot change as per sec. 11BB the interest is liable to be paid by dept. if the refund claim has not been sanctioned within 3 months from the date of filing of the claim since refund is delayed interest is payable by dept.

Summary

Issues:
- Refund claim rejection due to non-submission of original documents
- Delay in processing refund claim
- Entitlement to interest on delayed refund amount

Refund Claim Rejection:
The appellants, manufacturers and exporters of readymade garments, filed refund claims for Cenvat credit paid on exported garments. The Original Authority rejected the claims for not submitting original documents along with the claim. The Commissioner (A) allowed the appeal stating the claims were filed within the prescribed limit under the Central Excise Act, directing the Assistant Commissioner to process the claims. Despite this, the department insisted on original documents. The refund was later sanctioned, but interest was denied as original documents were produced after a delay. The Commissioner (A) found the delay reasonable, leading to no interest payment. The appellants appealed to the Tribunal, challenging the denial of interest.

Delay in Processing Refund Claim:
The appellants submitted refund claims on 2-1-2004 and 19-1-2004, following recovery of documents by departmental officers during a visit. Despite complying with document requirements, the refund was delayed until 24-8-2004 and 3-9-2004. The Commissioner (A) misinterpreted Section 11BB, wrongly concluding finality post the order on 28-4-2004. Section 11BB mandates interest payment if the refund isn't sanctioned within three months of filing, even after a favorable order. The Tribunal held that interest accrues after three months from filing until refund payment, as per Section 11BB's explanation. The delay was attributed to the department, entitling the appellants to interest from the filing date till refund receipt.

Entitlement to Interest on Delayed Refund Amount:
The Tribunal emphasized Section 11BB's provision for interest payment post three months from filing, irrespective of favorable orders. The appellants, having faced delays due to returned claims and departmental actions, were deemed entitled to interest. The Commissioner (A)'s failure to grasp this led to the Tribunal's decision in favor of the appellants, granting interest from the three-month mark post filing until the refund amount's payment. The appeals were allowed, providing consequential relief to the appellants.

This comprehensive analysis of the judgment highlights the issues of refund claim rejection, delay in processing, and entitlement to interest, elucidating the legal intricacies and the Tribunal's decision in favor of the appellants.