2014 (5) TMI 17 - HC - Central Excise

Claim of refund along with interest u/s 11BB of the Act Held that - Relying upon circular no.670/61/2002-CX, dated 01.10.2002 and Ranbaxy Laboratories Ltd. Vs. Union of India 2011 (10) TMI 16 - Supreme Court of India - Section 11BB of the Act comes into play only after an order for refund is being made - interest u/s 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 - the only interpretation of Section 11BB that can be arrived at is that interest under the 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 assessee is entitled for the interest u/s 11BB of the Act on the refunded amount, if the amount has been refunded after three months from the date of receipt of the application, but is not entitled for interest on interest the Authority is directed to calculate interest u/s 11BB of the Act Decided partly in favour of Assessee.

Summary

Issues:
Seeking direction for refund with interest under Section 11BB of the Income Tax Act, 1961 (Central Excise Act, 1944)

Analysis:
The petitioner filed refund claims in 2005, 2006, and 2007, with details mentioned in an adjudication order. While some claims were allowed, interest on pending claims was denied due to the petitioner's letter waiving interest. The petitioner argued that interest under Section 11BB of the Act is statutory and automatic, not dependent on the claim, citing Circular no.670/61/2002-CX and legal precedents. The respondent contended that the petitioner waived interest by letter. The court examined Section 11BB, emphasizing that interest payment is mandatory and automatic if refunds are delayed beyond three months. The court referred to the Ranbaxy case, clarifying that interest becomes payable if refunds are not made within three months of the application. The court held the petitioner entitled to interest under Section 11BB if refunds were delayed over three months. The petitioner's claim for interest on interest was rejected. The court directed the authority to calculate and pay the interest within two months.

This judgment addressed the issue of entitlement to interest under Section 11BB of the Act for delayed refunds. The court clarified that interest payment is automatic if refunds are not made within three months of the application, regardless of the claim by the party. The petitioner's waiver of interest was deemed irrelevant. The court referred to legal precedents and Circular no.670/61/2002-CX to support its decision. The court rejected the petitioner's claim for interest on interest but directed the authority to calculate and pay the interest within a specified timeframe.