2015 (10) TMI 368 - AT - Central Excise

Claim of interest on refund - delayed refund has been sanctioned u/s 11B - Held that - It is clear from the facts of the case that department had not carried out the necessary verifications while disposing of the refund applications and when the matter reached to the Hon ble CESTAT it categorically directed to conduct verification to clinch the issue. Therefore, there was no fault on the part of the appellants and the appellants were not responsible for delay that was caused for coming to correct decision in the matter. Department directed to pay interest, on the refund amount sanctioned, calculated at the notified rate/s, to the appellants as per provisions of Section 11BB of the Central Excise Act, 1944, for the period of delay as mentioned above. - Decided against the revenue.

Issues Involved:
- Entitlement to interest on refund under Section 11B of Central Excise Act, 1944 for delayed period.

Analysis:
1. Issue of Entitlement to Interest on Refund:
The main issue in this case revolved around whether the appellant was entitled to interest on a refund already sanctioned under Section 11B of the Central Excise Act, 1944 for the delayed period. The Revenue contended that interest was not applicable due to delays caused by incomplete information provided by the respondent, leading to a delay in refund sanctioning. However, the respondent argued that as per the Supreme Court's judgment in Ranbaxy Laboratories Ltd. v. UOI, interest is mandatory if the refund is delayed beyond three months from the application date. The respondent emphasized that the Revenue cannot escape interest payment even if certain verifications were pending, as the law mandates refund processing within three months.

2. Consideration of Legal Provisions:
The Tribunal carefully considered the provisions of Section 11BB of the Central Excise Act, 1944, which stipulate that if a duty refund is not processed within three months from the application date, interest must be paid to the claimant at a rate fixed by the Central Government. The explanation to this section clarifies that orders of refund by appellate authorities are deemed as orders under Section 11B, triggering interest payment obligations. Additionally, a circular emphasized that interest is automatically attracted for refunds sanctioned beyond three months, binding the department to pay interest without delay.

3. Judicial Precedents and Findings:
The Tribunal referred to various judgments, including Ranbaxy Laboratories Ltd. v. UOI and Commissioner of C.Ex. & Cus. v. J.K. Drugs & Pharmaceuticals, to establish that interest must be paid if refunds are delayed beyond three months. The Tribunal noted that the department's argument of conducting verifications did not absolve them of the obligation to process refunds within the stipulated time frame. The Tribunal upheld the Commissioner (Appeals) order, which extensively analyzed the legal provisions and precedents, concluding that interest should be paid to the appellants for the delayed period as per Section 11BB of the Act.

4. Final Decision and Dismissal of Appeal:
Based on the detailed findings and legal analysis, the Tribunal dismissed the Revenue's appeal, affirming the Commissioner (Appeals) order directing the department to pay interest on the sanctioned refund amount. The Tribunal upheld the application of Section 11BB and the obligation of the department to pay interest for delayed refunds, in line with judicial precedents and legal provisions. The decision was grounded in the settled law and the specific circumstances of the case, maintaining the interest payment requirement as per the Central Excise Act, 1944.

In conclusion, the judgment clarified the entitlement to interest on delayed refunds under Section 11BB, emphasizing the mandatory nature of interest payment if refunds are not processed within the specified time frame, as established by legal provisions and judicial precedents.

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