2023 (7) TMI 715 - HC - Central Excise

Interest on an asserted delay in disbursal of refund - petitioner alleges that the order of refund was never communicated to it and that despite repeated reminders, the respondents failed to apprise the petitioners of the status of its claim for refund constraining it to institute the present writ petition - Section 11B read along with Section 11BB of Central Excise Act - HELD THAT - The Court, at the outset notes, that Section 11B(1) in clear and unambiguous terms contemplates the making of an application for refund being made by any person claiming refund of any duty of excise and interest paid on such duty. The claim of refund insofar as the petitioner is concerned arose in the backdrop of the order in original coming to be set aside in appeal. The petitioner appears to have made an application for refund ultimately and only after the departmental appeal before the CESTAT came to be dismissed. It is deemed apposite to observe that the mere pendency of an appeal or an order of stay that may operate thereon would not detract from the obligation of any person claiming a refund making an application as contemplated under Section 11B(1) within the period prescribed and computed with reference to the relevant date - it is observed in light of the indubitable principle that an order of stay that may operate in an appeal does not efface the demand or the obligation of refund that may have sprung into existence. It merely places the enforcement of the order appealed against in abeyance. The order of stay would, in any case, be deemed to have never existed once the appeal comes to be dismissed. The subject of interest on delayed refund which is governed by Section 11BB itself prescribes the starting point for payment of interest on delayed refunds to be the date when an application under Section 11B(1) is received. On a conjoint reading of Sections 11B and 11BB of the 1944 Act, therefore, the irresistible conclusion arrived at that interest on delayed refund is clearly dependent upon the making of a formal application as stipulated by Section 11B of the 1944 Act. The distinction between Sections 11B and 35FF is also evident when one bears in mind the language employed in the latter and which stipulates that interest would commence from the date when the amount deposited by the appellant under Section 35F is required to be refunded consequent to an order passed by the Appellate Authority. Section 35FF thus indicates that interest would commence from the date of the order of the Appellate Authority as distinct from the making of an application which is prescribed to be the starting point insofar as Section 11BB of the 1944 Act is concerned. In eBIZ 2016 (9) TMI 1405 - ALLAHABAD HIGH COURT , the Allahabad High Court was not dealing with a claim for refund of duty but an amount deposited in the course of investigation. The High Court further went on to hold that even in the absence of a statutory provision if it be found that tax or duty had been wrongly collected, it would be liable to be refunded. There cannot be a dispute with regard to the aforenoted general proposition. The instant writ petitions shall stand disposed of.

Summary

Issues Involved:
1. Date from which interest is leviable on delayed refund under the Central Excise Act, 1944.
2. Requirement of a formal application for refund.
3. Distinction between refund of duty and pre-deposit.

Summary:

Issue 1: Date from which interest is leviable on delayed refund under the Central Excise Act, 1944:
The primary issue was whether interest on delayed refund should be calculated from the date the refund is determined or from the date a formal application is made by the assessee. The Court concluded that interest on delayed refunds is dependent on the making of a formal application as stipulated by Section 11B of the 1944 Act. Interest is payable if the refund is not effected within three months from the date of receipt of such application.

Issue 2: Requirement of a formal application for refund:
The petitioner argued that the obligation to refund should not be dependent on an application. However, the Court emphasized that Section 11B(1) clearly mandates the making of an application for refund. The application must be made within the period prescribed and computed with reference to the "relevant date." The Court noted that an order of stay in an appeal does not efface the demand or obligation of refund but merely places its enforcement in abeyance.

Issue 3: Distinction between refund of duty and pre-deposit:
The Court acknowledged the distinction between a refund of duty and a pre-deposit made in compliance with Section 35F of the 1944 Act. A pre-deposit is not considered "duty" and is treated differently under Section 35FF, which does not require a formal application and mandates interest from the date of the appellate order. Conversely, Section 11BB requires an application for refund and interest is calculated from three months after the receipt of such application.

Conclusion:
The Court disposed of the writ petitions by directing the respondents to revisit the issue of payment of interest. Interest, if any, should be computed and paid if the refund was effected beyond a period of three months from the date the respective applications were made and received. The Court upheld the statutory requirement of a formal application for refund under Sections 11B and 11BB and highlighted the distinction between refund of duty and pre-deposit.