2025 (4) TMI 183 - AT - Service Tax

Interest on delayed refund - whether the Commissioner (Appeals) ought to have decided the issue on payment of interest on the delayed refunds instead of remanding the same and whether the relevant date for payment of interest on delayed refunds as per Section 11BB of the Central Excise Act 1944 read with Section 83 of the Finance Act 1994? - HELD THAT - The question of interest on delayed refunds is no longer res integra in as much as the Hon ble Supreme Court of India in the case of Ranbaxy Laboratories Ltd. Versus Union of India 2011 (3) TMI 564 - CESTAT NEW DELHI referring to the relevant sections 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. Conclusion - Interest is to be paid to the appellant for the period commencing from the date immediately after expiry of three months from the date of receipt of refund applications till the date of refund of such duty. Therefore the Commissioner (Appeals) ought to have decided the issue on payment of interest on delayed refunds instead of remanding the matter for a decision by the lower authority. The impugned order is set aside - appeal allowed.

Summary

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered in this judgment are:

• Whether the Commissioner (Appeals) should have decided the issue of payment of interest on delayed refunds instead of remanding the matter to the original authority.
• The relevant date for the commencement of interest payment on delayed refunds as per Section 11BB of the Central Excise Act, 1944, read with Section 83 of the Finance Act, 1994.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Decision on Interest Payment by Commissioner (Appeals)

- Relevant Legal Framework and Precedents: The appellant argued that the obligation to pay interest on delayed refunds is automatic under Section 11BB of the Central Excise Act, 1944. The Tribunal's previous decisions and the High Court of Karnataka's judgment in the appellant's own case support this view.

- Court's Interpretation and Reasoning: The Tribunal observed that the Commissioner (Appeals) should have decided the issue of interest payment rather than remanding it. The Tribunal emphasized that once a refund is sanctioned, the interest liability arises automatically.

- Key Evidence and Findings: The Tribunal relied on prior judgments, including the Supreme Court's decision in Ranbaxy Laboratories Ltd. v. Union of India, which clarified that interest under Section 11BB becomes payable if the refund is delayed beyond three months from the date of application.

- Application of Law to Facts: The Tribunal applied the principle that interest on delayed refunds is a statutory obligation and should be granted automatically without further examination by the lower authority.

- Treatment of Competing Arguments: The Tribunal dismissed the Revenue's argument that interest liability arises only after the Commissioner (Appeals) remands the matter, stating that the law mandates interest payment from three months after the refund application date.

- Conclusions: The Tribunal concluded that the Commissioner (Appeals) erred in remanding the issue and should have directed the lower authority to sanction the interest.

Issue 2: Relevant Date for Interest Payment

- Relevant Legal Framework and Precedents: Section 11BB of the Central Excise Act, 1944, stipulates that interest on delayed refunds is payable from three months after the receipt of the refund application. The Tribunal referenced multiple judgments, including Ranbaxy Laboratories Ltd., to support this interpretation.

- Court's Interpretation and Reasoning: The Tribunal reiterated that the relevant date for interest payment is the expiry of three months from the date of the refund application, not the date of the refund order.

- Key Evidence and Findings: The Tribunal highlighted the consistent interpretation of Section 11BB by the Supreme Court and High Courts, which mandates interest payment from the specified date.

- Application of Law to Facts: The Tribunal applied the statutory interpretation to the appellant's case, determining that interest should be paid from the date specified in Section 11BB.

- Treatment of Competing Arguments: The Tribunal rejected the Revenue's reliance on a different case with distinguishable facts, affirming the established interpretation of Section 11BB.

- Conclusions: The Tribunal concluded that interest is payable from three months after the refund application date, consistent with statutory provisions and judicial precedents.

3. SIGNIFICANT HOLDINGS

- The Tribunal held that the Commissioner (Appeals) should have decided the issue of interest on delayed refunds rather than remanding it, as the obligation to pay interest arises automatically under Section 11BB of the Central Excise Act, 1944.

- The Tribunal affirmed that the relevant date for interest payment is the expiry of three months from the date of receipt of the refund application, as established by the Supreme Court in Ranbaxy Laboratories Ltd.

- The Tribunal set aside the impugned order and allowed the appeal, directing that interest be paid from the specified date in accordance with statutory provisions.