2017 (11) TMI 548 - AT - Service Tax

100% EOU - Interest on delayed refund - relevant date - expiry of three months from the date of receipt of application for refund or on the expiry of the said period from the date on which the order of refund is made - Held that - This issue is no longer res integra and has been settled by various decisions of the Tribunal; the High Court and the Supreme Court - the Hon ble Supreme Court in the case of Ranbaxy Laborites 2011 (10) TMI 16 - Supreme Court of India has categorically held that the appellant is entitled to interest after the expiry of three months from the date of filing the refund application till the refund is finally sanctioned - appeal allowed - decided in favor of appellant.

Summary

Issues:
- Rejection of interest claimed by the appellant for the period April 2008 to December 2013.
- Denial of interest on delayed refund by the department.
- Validity of the impugned order denying interest on delayed refund.
- Appellant's eligibility for interest on delayed refund of unutilized credit.
- Applicability of interest after the expiry of three months from the date of filing the refund application.
- Interpretation of Section 11BB of the Central Excise Act, 1944 regarding interest on delayed refunds.

Analysis:

1. Rejection of Interest Claimed by the Appellant:
The appellant, a 100% Export Oriented Unit engaged in Scientific and Technical Consultancy Services, filed refund claims under Rule 5 of CENVAT Credit Rules for the period April 2008 to December 2013. The Commissioner (A) rejected the interest claimed by the appellant, citing lack of direct nexus between input services and exported output services. The appellant approached the CESTAT at Bangalore, which allowed three appeals related to specific periods, but interest was not paid in compliance with Section 11BB of the Central Excise Act, 1944.

2. Denial of Interest on Delayed Refund:
The Assistant Commissioner of Service Tax refunded the amount but did not pay interest as per Section 11BB. The appellant filed a Writ Petition in the High Court of Karnataka, which directed the Assistant Commissioner to consider the interest claim. Despite follow-ups, the Assistant Commissioner rejected the interest amount, stating that interest was only applicable when duty was paid in cash or CENVAT credit was utilized for duty discharge.

3. Validity of the Impugned Order:
The appellant challenged the impugned order denying interest on delayed refunds, arguing that the department had reopened the case, which is impermissible under law. The appellant contended that interest should have been sanctioned within three months from the date of the refund application, as per judicial precedents and legal provisions.

4. Appellant's Eligibility for Interest on Delayed Refund:
The appellant asserted eligibility for interest on delayed refunds of unutilized credit, emphasizing that all refund claims had attained finality during earlier proceedings. Citing judicial decisions like Ranbaxy Laboratories Ltd., the appellant argued that interest should be paid after three months from the filing of the refund application until the refund is sanctioned.

5. Interpretation of Section 11BB:
The Tribunal, High Court, and Supreme Court have consistently held that interest under Section 11BB accrues after three months from the date of the refund application until the refund is sanctioned. Citing relevant case laws, the Tribunal found the impugned order unsustainable in law and allowed the appeal of the appellant, granting consequential relief.

In conclusion, the Tribunal set aside the impugned order, upholding the appellant's entitlement to interest on delayed refunds of unutilized credit, as per the provisions of Section 11BB and established judicial precedents.