2022 (11) TMI 1124 - HC - Central Excise

Interest on delayed refund - time limitation - whether there exists any liability of the revenue to pay interest under Section 11BB of the Act and whether it commences from the date of expiry of three months from the date of receipt of application for refund or on the expiry of the said period from the date on which the order of refund is made? - Section 11BB of the Central Excise Act 1944 - HELD THAT - The present controversy is squarely covered by the judgment of the Supreme Court in Ranbaxy Laboratories Ltd 2011 (10) TMI 16 - SUPREME COURT . The language of Section 11BB is plain and unambiguous. It casts a duty on the respondents to pay the interest on delayed refunds if refund is not made within three months from the date of receipt of application under Sub Section 1 of the relevant Section. Indisputably the said application was filed by the petitioner on 3.9.2014 (Annexure P-2). There are no merit in the singular objection raised by learned counsel for the respondents that upon passing the order of refund the competent authority became functus officio - the Statute makes it obligatory for the respondents to pay the interest on delayed payment and therefore if respondents have chosen to undertake an exercise partially by only refunding the amount without interest they cannot wriggle out from their statutory responsibility to pay the interest. The respondents shall now determine the amount of interest payable to the petitioner under Section 11BB of the Act in the light of Section 11BB of the Act as interpreted by the Supreme Court in Ranbaxy Laboratories Ltd and after calculating the amount of interest shall pay the same to the petitioner within eight weeks from the date of communication of this order - petition allowed.

Summary

Issues:
1. Entitlement to interest on refund under Section 11BB of the Central Excise Act 1944.

Analysis:
The petitioner-company challenged an impugned notice dated 3.9.2021 seeking a refund of Rs.1,40,02,152 along with interest. The central issue was whether the petitioner was entitled to interest on the refund amount. The petitioner contended that as per Section 11BB of the Act, interest is payable if the refund is not made within three months from the date of the refund application. The respondents argued that they were not liable to pay interest as the competent authority had become functus officio after issuing the refund order on 5.8.2022. The petitioner relied on the Supreme Court judgment in Ranbaxy Laboratories Ltd. vs. Union of India to support their claim for interest.

The court analyzed Section 11BB of the Act, which mandates payment of interest on delayed refunds. The court examined whether the liability to pay interest commences from the expiry of three months from the date of the refund application or from the date of the refund order. Referring to the Ranbaxy Laboratories Ltd. case, the court held that interest liability starts from the date of expiry of three months from the refund application date. The court emphasized that the statutory duty to pay interest cannot be avoided, even if the refund order has been issued without interest.

In conclusion, the court allowed the petition, directing the respondents to calculate and pay the interest amount to the petitioner within eight weeks from the date of the order. The court reiterated that the respondents must fulfill their statutory obligation to pay interest on delayed refunds as per Section 11BB of the Act and the interpretation provided by the Supreme Court in the Ranbaxy Laboratories Ltd. case.