2025 (1) TMI 479 - AT - Service Tax

Interest on delayed refund - relevant date from which the interest would be payable by the Revenue - rate of interest thereon. Interest on delayed refund - relevant date from which the interest would be payable by the Revenue - HELD THAT - The issue is no more res integra. The Hon‟ble Supreme Court in the case of RANBAXY LABORATORIES LTD. VERSUS UNION OF INDIA AND ORS. 2011 (10) TMI 16 - SUPREME COURT has held that ' the liability of the revenue to pay interest under Section 11BB of the Act commences from the date of expiry of three months from the date of receipt of application for refund under Section 11B(1) of the Act and not on the expiry of the said period from the date on which order of refund is made.' Thus, the appellant is eligible for the interest taking the refund claim date as the base. The appellant has filed the refund claim on 22.11.2007. Hence after considering the period of 3 months for processing of this application, the interest would be payable from 22.02.2008 till the date on which the refund has been paid to them. Rate of interest to adopted - HELD THAT - The Allahabad Bench, in the case of M/S. PARLE AGRO PVT. LTD. VERSUS COMMISSIONER, CENTRAL GOODS SERVICE TAX, NOIDA (VICE-VERSA) 2021 (5) TMI 870 - CESTAT ALLAHABAD has held that ' Section 11BB provides for interest on delayed refund. It states that if any duty ordered to be refunded under sub-section (2) of Section 11B is not refunded within three months from the date of receipt of the application, then the applicant shall be entitled to interest after the expiry of three months from the date of receipt of the application at such rate not below 5% and not exceeding 30% as may be notified by the Central Government in the Official Gazette.' - thus, the appellant would be eligible for interest @ 12% per annum. Conclusion - i) The interest is required to be paid from three months from the date of the initial filing of the refund claim till the date of granting the refund. ii) The interest is to be paid @ 12% per annum. iii) Interest to be paid within 8 weeks from the date of communication of this order. Appeal allowed.

1. ISSUES PRESENTED and CONSIDERED

The legal judgment primarily revolves around the following issues:

Whether the appellant is entitled to receive interest on the delayed refund of the service tax paid under protest, and if so, from what date should the interest be calculated.
The appropriate rate of interest applicable for the delayed refund in this case.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Entitlement to Interest on Delayed Refund

Relevant Legal Framework and Precedents:
- Section 11BB of the Central Excise Act, 1944, governs the interest on delayed refunds, stating that interest is payable if the refund is not processed within three months from the date of the refund application.
- The Supreme Court in Ranbaxy Laboratories Ltd. v. UOI established that interest under Section 11BB is payable from the date of expiry of three months from the date of receipt of the refund application, not from the date of the refund order.
Court's Interpretation and Reasoning:
- The Tribunal emphasized that the liability to pay interest commences from the expiry of three months from the date of receipt of the refund application, as per the Supreme Court's interpretation in the Ranbaxy Laboratories case.
- The Tribunal rejected the Revenue's argument that interest should be calculated from the date of the Tribunal's order allowing the refund.
Key Evidence and Findings:
- The appellant filed the refund claim on 22.11.2007, and the refund was granted on 23.7.2019. The Tribunal found that the delay in processing the refund was substantial.
Application of Law to Facts:
- The Tribunal applied Section 11BB and the precedents to determine that interest should be calculated from 22.02.2008, which is three months post the refund application date, until the refund was granted.
Treatment of Competing Arguments:
- The Tribunal dismissed the Revenue's contention that the interest calculation should start from the date of the Tribunal's order, affirming that the date of the refund application is the correct starting point.
Conclusions:
- The appellant is entitled to interest on the delayed refund from 22.02.2008 to 23.7.2019.

Issue 2: Appropriate Rate of Interest

Relevant Legal Framework and Precedents:
- Section 11BB allows for an interest rate between 5% and 30% as notified by the Central Government.
- Recent case law, such as Parle Agro Pvt. Ltd. and Churchit International, supports an interest rate of 12% for delayed refunds.
Court's Interpretation and Reasoning:
- The Tribunal acknowledged the precedents that have granted interest at 12% for similar cases of delayed refunds.
Key Evidence and Findings:
- The Tribunal found that the delay was not justified and that a higher interest rate would compensate for the undue delay.
Application of Law to Facts:
- The Tribunal applied the reasoning from prior judgments to determine that an interest rate of 12% per annum was appropriate in this case.
Treatment of Competing Arguments:
- The Tribunal dismissed any arguments for a lower interest rate, aligning with the established precedent of 12% for similar cases.
Conclusions:
- The appellant is entitled to interest at 12% per annum on the delayed refund.

3. SIGNIFICANT HOLDINGS

Preserve Verbatim Quotes of Crucial Legal Reasoning:
- "Interest under Section 11BB of the Act becomes payable on the expiry of a period of three months from the date of receipt of the application under Sub-section (1) of Section 11B of the Act."
Core Principles Established:
- The interest on delayed refunds is calculated from three months after the initial refund application date, not from the date of any subsequent orders.
- An interest rate of 12% per annum is appropriate for delayed refunds when the delay is unjustified.
Final Determinations on Each Issue:
- The appellant is entitled to interest on the delayed refund from 22.02.2008 to 23.7.2019.
- The interest rate applicable is 12% per annum.