2019 (3) TMI 153 - AT - Service Tax

Grant of Interest u/s 11BB of Central Excise Act, 1944 - whether the Department is liable to pay the interest on the amount of refund sanctioned? - Held that - The Hon ble Apex Court in the case of Ranbaxy Laboratories vs. Union of India & ORS 2011 (10) TMI 16 - SUPREME COURT OF INDIA clarified that the Boards own Notification dated 1/10/2002 has given a clear direction to the Department in case claims of non payment of interest in refund/rebate cases clarifying that the authority has not to wait for any order specifically payment of interest. The moment department becomes liable under Section 11 BB the consequence of payment of interest shall follow. The above adjudication is very much binding on this Tribunal. The Explanation to Section 11 BB further clarifies the controversy which says that where any order of refund is made by Commissioner (Appeals) Appellate Tribunal, National Tax Tribunal or any Court against the an order of Assistance Commissioner of Central Excise under sub-Section 2 of Section 11 B, the order passed by the Commissioner(Appeals), Appellate Tribunal or as the case may be shall be deemed to be an order passed under the sub-section 2 of the sub-Section B for the purposes of this Section - the application as has been referred in Section 11 B sub-Section 1 only has to be considered for the purposes of Section 11BB - In the present case the order of this Tribunal dated 4th August 2017, in view of the said explanation, reverts back to stage of order of the Assistant Commissioner. The refund dated 17.2.16 is much beyond 3 months of the date of initial order. The Department is liable to pay the interest. The Department has once sanctioned it but later denied while reviewing - appeal allowed - decided in favor of appellant.

Summary

Issues involved:
1. Eligibility for interest under Section 11BB of Central Excise Act, 1944.

Analysis:
The judgment involved a dispute regarding the eligibility for interest under Section 11BB of the Central Excise Act, 1944. The appellant had filed a refund claim for service tax paid erroneously on services not liable for tax. The claim was initially rejected, leading to a series of appeals and remands. Eventually, the refund was sanctioned without interest, prompting the appellant to request interest from the date of the original claim. The Department filed for a review, resulting in the denial of the sanctioned interest, leading to the present appeal.

The legal arguments presented by the appellant relied on various case laws to support their claim for interest. They highlighted a previous Tribunal decision in their favor and sought to set aside the impugned order. On the other hand, the Department argued that the refund application was filed within the required period of three months as per Section 11BB of the Act, and there was no error in the order under challenge.

The Tribunal analyzed the relevant provisions of Section 11B and 11BB of the Central Excise Act to determine the liability for interest on the sanctioned refund amount. The Tribunal clarified that interest becomes payable after three months from the date of the refund application if the amount claimed is not refunded. Citing previous court decisions, the Tribunal emphasized that the Department becomes liable to pay interest under Section 11BB once the refund order is made, without waiting for any specific direction.

Additionally, the Tribunal considered the Explanation to Section 11BB, which clarified that orders of refund by higher authorities are deemed to be under Section 11B for the purpose of interest payment. In this case, the Tribunal concluded that the Department was liable to pay interest as the refund order was beyond three months from the initial order, and the Department's denial of interest during the review was held to be legally incorrect.

In conclusion, the Tribunal set aside the order under challenge and allowed the appeal, holding the Department liable to pay interest on the sanctioned refund amount.