2024 (3) TMI 593 - AT - Service Tax

Interest in case of delayed refund - Section 11BB of the Central Excise Act, 1944 - interest sought on the ground that the refund was not sanctioned within three months - HELD THAT - The Hon ble Supreme Court in UNION OF INDIA OTHERS VERSUS M/S HAMDARD (WAQF) LABORATORIES 2016 (3) TMI 68 - SUPREME COURT came to the conclusion that it was obligatory on the part of department also to initiate deficiency memo as well as correspondence with the party relating to any deficiency in the refund claim within two days with the receipt of the application. Thus, it becomes important, the department to indicate that it actually gave a deficiency memo within two days of the receipt of the refund application filed with the department or to pay interest as per provisions of Section 11B. The matter is therefore remanded to the Commissioner (Appeals) to consider the same in view of cited decision as well as to consider the fact as asserted that no deficiency memo within the stipulated period of two days was given to the party. Appeal is allowed by way of remand.

Summary

Issues involved:
The issue involved in this case is interest in case of delayed refund as per the provisions of sub Section 11BB of the Central Excise Act, 1944.

Comprehensive details of the judgment:

Issue 1 - Interest on delayed refund:
The Authorized Representative of the appellant argued that there was no delay on their part in filing the refund application. The refund was eventually sanctioned on 31st August, 2015, and the amount was disbursed by 4th September, 2015. The party demanded interest on the refund from 16 March, 2015, to 4th September, 2015, as the refund was not sanctioned within three months.

Issue 2 - Legal precedents:
The Authorized representative relied on the case of RANBAXY LABORATORIES LTD VS. UNION OF INDIA and the decision of the Apex Court in UNION OF INDIA & ORS. Vs. HAMDARD (WAQF) LABORATORIES to support their claim for interest on delayed refund.

Issue 3 - Department's contention:
The Learned AR justified the department's stand by referring to a case involving V.R. OVERSEAS PVT. LTD VS. COMMISSIONER OF CUSTOMS (PORT), where it was held that interest for delay in refund is payable only after all shortcomings pointed out by the department are resolved and payment for refund has been delayed beyond the statutory period.

Issue 4 - Judicial interpretation:
The judgment referred to the decision of UNION OF INDIA & ORS. Vs. HAMDARD (WAQF) LABORATORIES, which emphasized that interest under Section 11BB becomes payable on the expiry of three months from the date of receipt of the refund application, regardless of when the order for refund is made.

Conclusion:
The Court concluded that the department should have initiated communication regarding any deficiencies in the refund claim within two days of receiving the application. Since this was not done in the present case, the appellant's demand for interest on delayed refund was upheld. The matter was remanded to the Commissioner (Appeals) for further consideration in light of the legal precedents cited.

This judgment highlights the importance of timely communication by the department regarding deficiencies in refund claims and the entitlement of parties to interest on delayed refunds as per the provisions of the Central Excise Act, 1944.