2022 (12) TMI 135 - HC - Central Excise

Interest on refund claim - interest is to be granted from the expiry of three months from the date of fling of the initial refund claimed or from the date of the order of the authority finally granting refund? - section 11BB of CEA - HELD THAT - The date of fling of application for refund before the Authority is not in dispute. Assuming that the Assistant Commissioner of Central Excise, in the present case, had proceeded to accept the claim of the Appellant for refund and proceeded to pass an Order in terms of Section 11B(2) of the Act, then in case the amount was not refunded despite such an Order, the Appellant would be entitled to interest on the delayed payment of the refund after the expiry of three months from the date of such an Order. Section 11B, therefore, does not at all envisage an application to be fled seeking refund. The only application, which Section 11B envisages is an application for refund in terms of Section 11B(1) and the only Order that the said Section 11B envisages is an Order under Section 11B(2), where if satisfied, the Assistant Commissioner of Central Excise or Deputy Commissioner may make an Order for refund of the whole or any part of the duty of excise and interest if any paid on such duty paid by the Appellant. The explanation appended to Section 11BB clearly takes care of a situation, where an Order of refund is made by the Commissioner of Appeals, the Appellate Tribunal or any Court against an Order of the Assistant Commissioner of Central Excise or Deputy Commissioner of Central Excise under sub-section (2) of Section 11B, such an Order would be deemed to be an Order passed under the said sub-section (2) of Section 11B for the purposes of Section 11BB, that is payment of interest on delayed refund. The tribunal, in its Order impugned wrongly applied the judgement of the Apex Court 2011 (10) TMI 16 - SUPREME COURT for purposes of denying the benefit of interest on delayed refund by holding that it was not entitled to the same from the date of the application under Section 11B(1), but only after the expiry of three months from the date of the Order of the tribunal dated 10 February 2016, if such applications were fled in terms of the said Order and were disposed of within three months thereof. Appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Interpretation of Section 11BB - Liability of revenue to pay interest on delayed refunds.
2. Application of Supreme Court judgment in the case of Ranbaxy Laboratories Ltd. Vs. UoI.
3. Entitlement to interest under Section 11BB from the date of application or the date of refund order.

Issue 1: Interpretation of Section 11BB - Liability of revenue to pay interest on delayed refunds

The appeals were filed against a common Order passed by the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) regarding the entitlement to interest under Section 11BB of the Central Excise Act, 1944. The Appellant had filed refund applications for duty under the CENVAT Credit Rules, 2004, which were initially rejected but later allowed by the CESTAT. The Appellant claimed interest under Section 11BB, which was rejected. The crucial question was whether the liability to pay interest under Section 11BB commences from the date of the refund application or the date of the refund order. The Court analyzed the provisions of Section 11B and Section 11BB to determine that interest is payable on delayed refunds beyond three months from the date of the refund application, not the date of the refund order. The Court emphasized that Section 11B only envisages an application for refund under Section 11B(1) and an order for refund under Section 11B(2), with interest payable if the refund is not made within three months from the date of the order.

Issue 2: Application of Supreme Court judgment in the case of Ranbaxy Laboratories Ltd. Vs. UoI

The Appellant argued that the CESTAT wrongly interpreted the provisions of Section 11BB and failed to consider the Supreme Court judgment in the case of Ranbaxy Laboratories Ltd. Vs. Union of India. The Appellant contended that the Apex Court had clarified that the liability to pay interest under Section 11BB starts from the expiry of three months from the date of the refund application, not from the date of the refund order. The Court agreed with the Appellant's interpretation and held that the CESTAT erred in applying the Supreme Court judgment incorrectly. The Court emphasized that interest on delayed refunds is payable in accordance with the provisions of Section 11BB, starting from the date of the refund application.

Issue 3: Entitlement to interest under Section 11BB from the date of application or the date of refund order

The primary contention revolved around whether the Appellant was entitled to interest under Section 11BB from the date of the refund application or the date of the refund order. The Court clarified that the liability to pay interest on delayed refunds arises from the date of the refund application, as per the provisions of Section 11BB and the interpretation provided by the Supreme Court in the Ranbaxy Laboratories Ltd. case. The Court allowed the appeals, holding in favor of the Appellant and emphasizing that interest on delayed refunds should be calculated from the date of the refund application under Section 11B(1), not the date of the refund order.