2022 (8) TMI 1199 - HC - Central Excise

Interest on delayed refund of unutilised CENVAT Credit - refund was issued after the expiry of three months, or not - time limitation - section 11BB of CEA - HELD THAT - As held by the Apex Court in RANBAXY LABORATORIES LTD. VERSUS UNION OF INDIA AND ORS. 2011 (10) TMI 16 - SUPREME COURT , a fiscal legislation has to be construed strictly and one has to look merely at what is said in the relevant provision; there is nothing to be read in; nothing to be implied; and there is no room for any of intendment. The liability of the revenue to pay interest under Section 11BB of the Act commenced from the date of expiry of three months from the date of receipt of application for refund under Section 11BB(1) of the Act. The Division Bench of this Court in SWARAJ MAZDA LIMITED VERSUS UNION OF INDIA 2008 (7) TMI 420 - HIGH COURT OF JUDICATURE AT BOMBAY also held that perusal of Section 11BB shows that if any duty recovered is found to be refundable, still the payment is not made within a period of three months from the receipt of application for refund then interest is liable to be paid. The respondent shall pay interest to petitioner in compliance with provisions of Section 11BB of the Act for the period after the expiry of three months from the date of respective applications till the date of payment of refund amount in accordance with law - Petition disposed off.

Summary

Issues Involved:
1. Entitlement to interest on delayed refund of CENVAT credit under Section 11BB of the Central Excise Act, 1944.
2. Determination of the period from which interest on delayed refund becomes payable.
3. Responsibility of the revenue to notify deficiencies in refund applications promptly.

Issue-wise Detailed Analysis:

1. Entitlement to interest on delayed refund of CENVAT credit under Section 11BB of the Central Excise Act, 1944:

The petitioner, engaged in providing Information Technology enabled Services to its group entities outside India, accumulated CENVAT credit due to the export of services without payment of service tax. The petitioner claimed that under Rule 5 of the CENVAT Credit Rules, 2004, they were entitled to a refund of the unutilized credit. The petitioner filed eight refund applications, which were processed, and refunds were granted. However, the petitioner sought interest on the refund amounts, asserting that the refunds were issued after the stipulated three-month period as per Section 11BB of the Central Excise Act, 1944.

2. Determination of the period from which interest on delayed refund becomes payable:

The petitioner argued that the interest should be payable from the date immediately after the expiry of three months from the date of receipt of the refund application until the date of refund. The respondent contended that the delay was due to defects in the application, which were subsequently rectified. The petitioner countered that the three-month period was for the respondent to raise objections or point out defects, and any delay beyond this period could not be attributed to the petitioner. The court referred to the Supreme Court's judgment in Union of India vs. Hamdard (WAQF) Laboratories, which emphasized that the liability to pay interest under Section 11BB commences from the date of expiry of three months from the date of receipt of the application for refund, regardless of whether the application had defects that were later rectified.

3. Responsibility of the revenue to notify deficiencies in refund applications promptly:

The court highlighted that it was the revenue's obligation to promptly notify the petitioner of any deficiencies in the application. The Supreme Court in Hamdard (WAQF) Laboratories and Ranbaxy Laboratories Limited vs. Union of India underscored that the revenue must intimate the assessee to remove deficiencies within a reasonable period (suggested as two days) and that the adjudication process should not extend beyond three months. The court found that the respondent failed to notify the petitioner within a reasonable time, leading to an unjustified delay in processing the refund.

Conclusion:

The court concluded that the petitioner's claim for interest on the delayed refund was valid. It was obligatory for the revenue to notify the petitioner of any deficiencies immediately and complete the adjudication process within three months. The court ordered the respondent to pay interest to the petitioner in compliance with Section 11BB of the Central Excise Act, 1944, for the period after the expiry of three months from the date of the respective applications until the date of payment of the refund amount. The interest was to be paid within four weeks at the prevailing rate notified by the Central Government. The petition was disposed of with no order as to costs, and the certified copy of the order was expedited.