2017 (3) TMI 70 - HC - Service Tax

Interest on delayed refund - Section 11B of the CEA, 1944 - Held that - the clear reference to date of receipt of such application in Section 11 BB which mandates payment of interest, precludes the Revenue from arguing the matter which it does today - respondent s argument that neither the adjudicating authority granted interest nor did petitioner seek it at any stage is of no avail - interest allowed - petition allowed - decided in favor of petitioner.

Summary

Issues:
1. Refund claim under Section 11B of the Central Excise Act, 1944 without interest directed to be paid.
2. Interpretation of Section 11BB regarding the liability to pay interest on belated refunds.
3. Application of legal precedents in determining the commencement date for the payment of interest.

Analysis:
The primary issue in this case revolves around the petitioner's refund claim under Section 11B of the Central Excise Act, 1944, where the Commissioner (Appeals) allowed the claim but did not direct the payment of interest. The Revenue's stance was that since no authority directed the payment of interest, there was no obligation to pay any amount towards delayed refund. The petitioner relied on the judgment in M/s. Ranbaxy Laboratories Ltd. v. Union of India & Ors., emphasizing the importance of interest payment in such cases. The court delved into the interpretation of Section 11BB to determine the liability to pay interest on belated refunds, citing legal precedents to support its analysis.

The court referred to the judgment in M/s. Ranbaxy Laboratories Ltd. v. Union of India & Ors. to establish 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 the application for refund under Section 11B(1) of the Act. This interpretation was crucial in deciding the case at hand, as it precluded the Revenue from arguing against the payment of interest based on the lack of specific direction from the adjudicating authority. The court emphasized the significance of the "date of receipt of such application" as stated in Section 11BB, aligning with the Supreme Court's view in the Ranbaxy case.

Furthermore, the court analyzed the decision in Shreeji Colour Chem Industries, highlighting the importance of the date of receipt of the refund application in determining the commencement of the period for the payment of interest under Section 11BB. By clarifying that the liability to pay interest starts from the expiry of three months from the application date, the court resolved the issue in favor of the petitioner. Consequently, the court allowed the petition, directing the respondents to ensure the payment of interest to the petitioner within three months from the date of receipt of the refund application, in compliance with Section 11BB of the Act.