2022 (2) TMI 954 - AT - Service Tax

Interest on delayed sanction of refund - rejection on the ground that there was no delay on the part of the department in sanctioning the refund amount inasmuch as the refund applications were processed after submission of all the relevant documents by the appellant - Section 11BB of the Central Excise Act, 1944 - HELD THAT - The learned Assistant Commissioner in the original order dated 12.09.2017 had considered the refund application filed by the appellant during the year, 2009 and thereafter, sanctioned the refund amount in question to the Appellant in the year 2017. On plain reading of the statutory provisions of Section 11BB of the Central Excise Act, 1944, it transpires that if the refund amount is not paid within the stipulated time frame of three months from the date of filing of the application, then the department is exposed to the interest liability for the period of expiry of three months till the date of actual sanction of the refund amount. Considering the Revenue loss on account of payments of interest for delayed sanction of refund, the Central Board of Excise and Customs (CBEC) vide Circular dated 30.05.1995 had clarified that if any defect in refund application is observed by the department, then the same had to be communicated to the party/claimant within 48 hours from the time of receipt of the refund application. It is an admitted fact on record that the department had not observed the guidelines provided in the Circular dated 30.05.1995. Since, the refund applications filed by the Appellant in 2009 were ultimately considered for grant of refund in the year 2017, admittedly there is delay and as such, the provisions of Section 11BB ibid are automatically attracted for payment of interest on the delayed sanction of the refund amount. There is no substance in the submissions made by the learned AR for Revenue that the revised application filed by the Appellant in the year 2017 were to be considered as the relevant date of filing of applications for grant of refund inasmuch as the original authority nowhere in the order dated 12.09.2017 had considered such facts. Rather, in the first paragraph of the original order, it had specifically been recorded that the refund application filed on 29.06.2009 was considered for grant of the refund amount. On examination of the records available in the case file vis-a-vis the statutory provisions, it can be concluded that the fact that there is in fact delay in grant of refund amount to the appellant and therefore, for such delayed sanction of refund, the appellant should be compensated by way of payment of interest. There are no merits in the impugned orders passed by the learned Commissioner (Appeals), in denying the benefit of interest to the Appellant - appeal allowed - decided in favor of appellant.

Summary

Issues:
- Refund of service tax paid on taxable services for exportation of goods
- Denial of refund due to lack of relevant documents
- Appeal against denial of refund
- Claim for interest on delayed refund
- Interpretation of Section 11BB of the Central Excise Act, 1944
- Application of interest rate prescribed by the Central Government
- Comparison of judgments supporting interest payment on delayed refunds

Refund of Service Tax Paid on Taxable Services for Exportation of Goods:
The Appellant, engaged in the manufacture of various products falling under specific chapters of the Central Excise Tariff Act, availed taxable services for exportation of goods. The Appellant filed refund applications under Notification No. 41/2007-ST for service tax paid on these services. The department denied the refund citing lack of relevant documents, leading to appeals and subsequent adjudication.

Denial of Refund Due to Lack of Relevant Documents:
The original orders denying the refund were appealed against before the Commissioner (Appeals), who upheld the findings. The Tribunal remanded the case for submission of necessary documents and de-novo adjudication. The original authority eventually sanctioned the refund, but without considering interest payment on delayed refund as per Section 11BB of the Central Excise Act, 1944.

Claim for Interest on Delayed Refund:
The Appellant claimed interest on the delayed refund, citing Section 11BB, which mandates interest payment if the refund is not granted within three months of application. The Appellant's Advocate referenced relevant judgments supporting interest payment on delayed refunds, emphasizing the delay in the present case.

Interpretation of Section 11BB and Application of Interest Rate:
The Tribunal examined Section 11BB, which outlines the interest payment on delayed refunds. The Central Board of Excise and Customs (CBEC) circular highlighted the need to communicate any defects in refund applications promptly. The Tribunal found a delay in granting the refund, making the Appellant eligible for interest payment.

Comparison of Judgments Supporting Interest Payment:
The Tribunal compared judgments cited by both parties, noting that the Appellant's references supported interest payment on delayed refunds. The Tribunal distinguished these judgments from those cited by the Revenue, emphasizing the clear provision of Section 11BB for interest payment in case of delayed refunds.

Conclusion:
The Tribunal found no merit in the Commissioner (Appeals)'s decision to deny interest to the Appellant. By setting aside the impugned orders, the Appeals were allowed in favor of the Appellant, granting them the consequential benefit of interest on the delayed refund.