2019 (6) TMI 1142 - HC - Central Excise

Interest on delayed refund - time imitation - Section 11BB of Central Excise Act - HELD THAT - It is an undisputed position that the refund has to be granted under Section 11BB of the Act within a period of 3 months from the date of the application for refund, if the refund is not paid during the stipulated 3 months period, the interest start running. In terms of Section 11BB of the Act, the Revenue was obliged to give interest along with principal amount in terms of Section 11BB of the Act. The fact that the principal amount of ₹ 49.17 lakhs was refunded to the respondent is in appeal before the Hon'ble Supreme Court would not detract from the obligation of the Revenue to comply with the provisions of Section 11BB of the Act in the absence of any stay to the order dated 24th March, 2011 of the Hon'ble Gujarat High Court by the Apex Court. The liability of interest commences after 3 months of the refund application, if the refund is not made within 3 months from the date of application for refund. Thus, it runs along with the principal amount Mere pendency of the appeal before the Apex Court would not justify the Revenue ignoring the statutory provisions of the Act namely Section 11BB of the Act. This it has to comply - It is selfevident position on reading of Section 11BB of the Act that the interest has to be granted if the refund is not made within a period of 3 months from the date of application for refund. The question as proposed does not give rise to any substantial question of law. Thus, not entertained - appeal dismissed.

Summary

Issues:
- Entitlement to interest on refund sanctioned
- Compliance with Section 11BB of the Central Excise Act, 1944
- Applicability of judicial precedents

Entitlement to interest on refund sanctioned:
The respondent, engaged in manufacturing cosmetic shampoo, sought a refund of ?49.17 lakhs after a dispute regarding the assessment basis. The Gujarat High Court ruled in favor of the respondent, allowing the refund. Subsequently, the appellant refunded the principal amount but did not pay the interest due under Section 11BB of the Act. The Tribunal, following the decision in Ranbaxy Laboratories Ltd. Vs. Union of India, held that interest should be paid from three months after the refund application until the actual refund date. The appellant argued that interest should await the final decision of the Supreme Court on the principal amount. However, the court emphasized the obligation to grant interest under Section 11BB, irrespective of the principal amount's status in appeal.

Compliance with Section 11BB of the Central Excise Act, 1944:
Section 11BB mandates that if a refund is not paid within three months of the application, interest must be provided along with the principal amount. The court clarified that the obligation to pay interest arises after the expiry of the three-month period from the refund application date. The pendency of the appeal before the Supreme Court does not absolve the Revenue from complying with the statutory provisions of Section 11BB. The court affirmed that interest must be granted if the refund is not made within the stipulated three months, emphasizing the mandatory nature of this provision.

Applicability of judicial precedents:
The court dismissed the appeal, stating that the question posed did not raise any substantial legal issue. The Tribunal's decision to grant interest aligns with the clear mandate of Section 11BB, highlighting the statutory requirement to provide interest if refunds are not issued within the specified timeframe. The judgment underscores the importance of adhering to legal provisions and honoring obligations under the Central Excise Act, 1944, even in the presence of pending appeals or disputes regarding the principal amount.