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2025 (4) TMI 1290 - AT - Service TaxDenial of the appellant s claim for interest on delayed refund - Section 11BB of the Central Excise Act 1944 - HELD THAT - An assessee is entitled to litigate for securing its legitimate interests and the fact that the assessee has so litigated cannot per se be held against the assessee or be a ground to deny it s just dues. As per Section 11BB of the Central Excise Act 1944 the relevant date for payment of interest hinges only on the date of receipt of the application and if the duty is not refunded within a period of three months from the date of receipt of the application then the applicant shall be paid interest at the specified rates fixed by the Central Government on expiry of a period of three months from the date of receipt of the application. The issue is no more res-integra and it is worthwhile to reproduce what the Honourable Supreme Court has held on this aspect in its Judgement dated 21-10-2011 more than a decade ago in Ranbaxy Laboratories Ltd v. Union of India 2011 (10) TMI 16 - SUPREME COURT . The Honourable Apex Court after referring to the relevant provisions of Section 11B of the Act dealing with claims for refund of duty as well as Section 11BB pertaining to interest on delayed refunds went on to hold that the only interpretation of Section 11BB that can be arrived at is that interest under the said Section 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 and that the said Explanation does not have any bearing or connection with the date from which interest under Section 11BB of the Act becomes payable. The finding in the impugned OIA by the appellate authority that the appellant s claim for payment if interest is not justified is decidedly untenable and is liable to be set aside Conclusion - The appellant is entitled to interest on delayed refund under Section 11BB of the Central Excise Act 1944 from the expiry of three months from the date of receipt of the refund claim. Appeal allowed.
1. ISSUES PRESENTED and CONSIDERED
The core legal question considered by the Tribunal was whether the denial of interest on delayed refund to the appellant was tenable under the relevant statutory provisions, particularly Section 11BB of the Central Excise Act, 1944. The Tribunal examined the entitlement of the appellant to interest on the refund amount sanctioned after a protracted litigation process, despite the refund claim itself being allowed. The issue of delay attributable to the Department versus delay caused by the appellant's own appeals was also considered in determining the justification for interest payment. 2. ISSUE-WISE DETAILED ANALYSIS Entitlement to Interest on Delayed Refund Relevant Legal Framework and Precedents: The Tribunal relied primarily on Section 11BB of the Central Excise Act, 1944, which mandates payment of interest on delayed refunds if the refund is not sanctioned within three months from the date of receipt of the refund application. The Tribunal also considered Section 11B of the Act, which governs claims for refund. The Supreme Court's authoritative ruling in Ranbaxy Laboratories Ltd v. Union of India (2011) was pivotal, wherein it was held that interest under Section 11BB becomes payable after expiry of three months from the date of receipt of the refund application, irrespective of when the refund order is passed. The Court clarified that the Explanation to Section 11BB does not postpone the date from which interest accrues. Subsequent Supreme Court decisions, including UOI v Hamdard (Waqf) Laboratories (2017) and Manisha Pharmo Plast Pvt Ltd v UOI (2020), have consistently followed this principle. Court's Interpretation and Reasoning: The Tribunal noted that the refund claim was filed on 02.07.2008 and acknowledged by the Department on 14.07.2008. Although a Show Cause Notice proposing rejection of the refund claim was issued on 22.10.2008, and separate proceedings for recovery of ineligible credit were initiated only later on 09.04.2009, the Tribunal emphasized that the appellant's litigation efforts to protect its legitimate interests cannot be held against it to deny interest. The Tribunal underscored that the delay in refund was not solely attributable to the Department but was intertwined with the appellant's appeals, which prolonged the final adjudication. Key Evidence and Findings: The Tribunal examined the timeline of events: initial refund claim, issuance of Show Cause Notices, adjudication orders, appeals, and final orders. It was found that the refund amount was eventually allowed by the appellate authority, but interest was denied on the ground that there was no undue delay by the Department. The Tribunal rejected this rationale, holding that the statutory mandate for interest is triggered by the date of receipt of the refund claim and the failure to refund within three months, regardless of the litigation process. Application of Law to Facts: Applying the statutory provisions and Supreme Court precedents to the facts, the Tribunal concluded that the appellant was entitled to interest from the date of expiry of three months from 14.07.2008, the date the refund claim was received by the Department. The fact that the refund order was passed after prolonged litigation did not absolve the Department from liability to pay interest. Treatment of Competing Arguments: The Department argued that the delay was caused by the two-stage appeals filed by the appellant and that the refund claim was pending due to these proceedings, hence interest was not justified. The Tribunal rejected this argument, emphasizing the principle that an assessee's legitimate litigation cannot be a ground to deny interest. The Tribunal also noted that the Department's own delay in initiating recovery proceedings and adjudication contributed to the delay. Conclusions: The Tribunal set aside the appellate authority's finding denying interest and held that the appellant was entitled to interest under Section 11BB of the Central Excise Act from the expiry of three months from the date of receipt of the refund application. It directed the refund sanctioning authority to expedite payment of the refund and applicable interest within thirty days of the order. 3. SIGNIFICANT HOLDINGS The Tribunal crystallized the legal position on interest entitlement in refund cases under the Central Excise Act as follows: "It is manifest from the afore-extracted provisions that Section 11BB of the Act comes into play only after an order for refund has been made under Section 11B of the Act. Section 11BB of the Act lays down that in case any duty paid is found refundable and if the duty is not refunded within a period of three months from the date of receipt of the application to be submitted under sub-section (1) of Section 11B of the Act, then the applicant shall be paid interest at such rate, as may be fixed by the Central Government, on expiry of a period of three months from the date of receipt of the application. The Explanation appearing below Proviso to Section 11BB introduces a deeming fiction that where the order for refund of duty is not made by the Assistant Commissioner of Central Excise or Deputy Commissioner of Central Excise but by an Appellate Authority or the Court, then for the purpose of this Section the order made by such higher Appellate Authority or by the Court shall be deemed to be an order made under sub-section (2) of Section 11B of the Act. It is clear that the Explanation has nothing to do with the postponement of the date from which interest becomes payable under Section 11BB of the Act. Manifestly, interest under Section 11BB of the Act becomes payable, if on an expiry of a period of three months from the date of receipt of the application for refund, the amount claimed is still not refunded. Thus, the only interpretation of Section 11BB that can be arrived at is that interest under the said Section 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 and that the said Explanation does not have any bearing or connection with the date from which interest under Section 11BB of the Act becomes payable." The Tribunal reaffirmed that the appellant's right to interest is not negated by the pendency of appeals or litigation initiated by the appellant, and that the Department's delay in refunding the amount beyond the statutory period attracts liability to pay interest. Final determinations:
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