2019 (2) TMI 581 - AT - Service Tax

Interest on delayed refund - relevant date for calculation of Interest - Section 11B of the Central Excise Act - Held that - The Hon ble Apex Court in the case of Ranbaxy Laboratories Ltd. Vs. UOI 2011 (10) TMI 16 - SUPREME COURT OF INDIA has upheld grant of interest in case of late disbursal of refund from the expiry of three months of refund application till refund is granted and not from the date of order of refund. The original authority is directed to compute the interest as per the direction of the Hon ble Apex Court in the case of Ranbaxy Laboratories Ltd. and grant the interest within a period of three months from the date of receipt of this order - appeal allowed - decided in favor of appellant.

Summary

Issues:
- Refund of interest on sanctioned refund
- Applicability of interest under Section 11BB of the Central Excise Act
- Interpretation of CENVAT credit rules
- Judicial precedent on refund of CENVAT credit
- Compliance with legal provisions in refund cases

Analysis:

The case involved five appeals against a common order remanding the matter for fresh adjudication. The appellant, engaged in exporting services, sought a refund of interest on a sanctioned refund. The appellant exported software design and development services to group companies abroad, which were taxable under Information Technology Software Services. The original authority allowed a refund but denied interest. The Commissioner(Appeals) remanded the matter without addressing the interest issue, prompting the appeals.

The appellant argued that the impugned order was legally unsustainable and contrary to judicial precedents. Citing cases like Rajalakshmi Textile Processor and Reliance Industries Ltd., the appellant contended that CENVAT credit is akin to duty payment, entitling them to interest under Section 11BB of the Central Excise Act. The appellant also referenced Mumbai Tribunal and Supreme Court decisions supporting interest on delayed refunds.

The consultant highlighted a circular by CBEC and a previous Tribunal order in the appellant's favor, emphasizing the automatic applicability of Section 11BB for refunds beyond three months. The settled legal position, as per Supreme Court rulings, mandated the grant of interest on delayed refunds. Consequently, the impugned order was set aside, directing the original authority to calculate and grant interest within three months.

In conclusion, the judgment clarified the entitlement to interest on delayed refunds of CENVAT credit, aligning with established legal principles and judicial interpretations. The decision underscored the importance of complying with legal provisions and honoring refund claims promptly, as mandated by relevant statutes and judicial precedents.