2017 (3) TMI 566 - AT - Service Tax

Entitlement to interest u/s 11BB of the CEA, 1944 - delayed disbursement of refund - Held that - reminder letter has no relevance to determine the time limit u/s 11B - Further, the learned Commissioner (Appeals) referred to the provision of Clause (ec) under Explanation B to Section 11B. The said provision is relating to consequential refund arising out of an appellate order. In the present case, I note that the refund claim has not arisen consequential to any appellate order. The appellate order only decides the correctness of the claim already filed and rejected by the Original Authority. This cannot be considered as a refund consequent on an appellate order - the refund amount paid is with reference to the original application for refund filed by the appellant - appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Applicability of Section 11BB for interest on delayed refund.
2. Relevant date for calculating time limit under Section 11B.
3. Interpretation of Clause (ec) under Explanation B to Section 11B.
4. Refund consequential to appellate order.
5. Precedent set by the Hon'ble Supreme Court in Ranbaxy Laboratories Ltd. vs. Union of India.

Analysis:
1. The case involved the appellants engaged in exporting Iron and Steel products who filed refund claims for service tax paid on services related to export. Initially rejected, the claims were later sanctioned by the Commissioner (Appeals). The appellants sought interest under Section 11BB of the Central Excise Act, 1944, for delayed refund disbursement. The Original Authority denied interest, stating Section 11B and 11BB did not apply to the refund claims under specific notifications. The Commissioner (Appeals) found Section 11BB applicable but noted no delay in refund sanction based on a letter from the appellants to the Assistant Commissioner. The Tribunal found the Commissioner's interpretation incorrect, emphasizing the statutory time limit under Section 11B from the date of filing the refund claim, not subsequent communications.

2. The Tribunal highlighted that the reminder letter from the appellants to expedite refund did not determine the time limit under Section 11B. Additionally, the Tribunal noted that the refund claim did not arise consequent to an appellate order but was based on the original application rejected by the Original Authority. Citing the Ranbaxy Laboratories Ltd. case, the Tribunal reiterated that interest under Section 11BB becomes payable after three months from the date of the refund application, not the order date. The Tribunal set aside the impugned orders, allowing the appeals with consequential relief.

3. The Tribunal's analysis focused on the correct application of Section 11B and 11BB to the appellants' refund claims, emphasizing the statutory time limit from the date of filing the claim. By referencing the Ranbaxy Laboratories Ltd. case, the Tribunal clarified that interest under Section 11BB becomes payable after three months from the application date, not the order date. The Tribunal's decision set aside the Commissioner (Appeals) findings, providing clarity on the applicable provisions and the calculation of interest on delayed refunds.