2014 (11) TMI 206 - AT - Service Tax

Interest on delayed refund claim - whether the appellant is eligible for interest on the refunds sanctioned belatedly - Held that - refund has been ordered under Rule 5 of the Rules and there was a delay in sanctioning the refund, in the circumstances, the provisions of Section 11BB of the Act would clearly be attracted and as such the Tribunal was justified in holding that the provisions of clause (c) of the proviso to sub-section (2) of Section 11B and consequently Section 11BB of the Act are clearly applicable to the facts of the present case and as such the respondent is entitled to interest on delayed refund of Cenvat Credit as claimed by it. As per the instructions issued by the Central Government refunds under Rule 57F of the erstwhile Central Excise Rules, 1944 would be governed by the provisions of Section 11BB of the Act. Rule 57F of the said Rules made provision for the manner of utilisation of inputs and credit allowed in respect of duty paid thereon. Sub-rule (13) of rule 57F made provision for refund of accumulated credit in case where for any reason it was not possible to adjust the same in the manner provided under the said sub-rule. Sub-rule (13) of Rule 57F of the said Rules is more or less in pari materia to the provisions of Rule 5 of the Cenvat Credit Rules, 2002/2004. Thus, the instructions issued by the Central Government under the aforesaid Circular would also be applicable to refunds under rule 5 of the Rules, which instructions are binding on the revenue. - Decided against Revenue.

Summary

Issues:
- Eligibility for interest on belated refunds under Notification No. 15/2009-ST.

Analysis:
1. The appeal challenged OIA No. 625/2013/(RAJ)CE/AK/COMMR(A)/AHD dated 31.12.2013 regarding refund claims of interest. The First Appellate Authority agreed with the respondents and allowed interest on belated refunds, leading to the Revenue's appeal.

2. The appellant's counsel argued that interest is payable on belated refunds beyond 3 months from the refund claim filing date, citing relevant judgments like Ranbaxy Ltd vs UOI - 2012.27.STR.173(SC) and Amalgamated Plantations Pvt Ltd vs UOI - 2013.296.ELT.13. Additionally, circulars like CBEC Circular No. 114/8/2009-ST and High Court judgments supported the interest claim.

3. The Revenue contended that Notification No. 15/2009-ST did not provide for interest payment, and both lower authorities correctly concluded that Section 11B and 11BB of the Central Excise Act 1944 did not apply to these refund claims.

4. The Tribunal analyzed the case and found that the lower authorities erred in not granting interest on belated refunds. Firstly, services in SEZ units are exempt, and the notifications merely operationalize SEZ unit exemptions. Secondly, the Board's circulars mandated timely refund processing, which was not followed, justifying interest payment. Thirdly, the High Court's judgment supported interest on delayed refunds under Rule 5 of Cenvat Credit Rules.

5. Referring to the Circular: 130/41/95-CX, the Tribunal upheld the interest claim under Section 11BB of the Act, emphasizing the applicability of interest provisions to the facts of the case. The Tribunal concluded that the impugned orders allowing interest on belated refunds were correct as per established legal principles.

6. Consequently, the Tribunal upheld the impugned orders, affirming the interest claim for the appellant and rejecting the appeals. The judgment was pronounced on 21.10.2014.