2019 (9) TMI 832 - AT - Central Excise

Interest on refund - duty paid on the inputs utilized in the manufacture of exported detergent - Section 11BB of CEA - HELD THAT - The proviso to the said Section lays down that where the refund application stands made before the date on which the Finance Bill, 1995 receives the assent of the president and is not refunded within 3 months from such date, the appellant shall be paid interest under the said Section from the date immediately after three months from such date, till the date of refund of such amount - In terms of the said proviso, which applies to all the refund applications pending on the date of introduction of said Section 11BB, all such refund applications are supposed to be decided within a period of 3 months and if the amount is not refunded, the assessee shall be entitled to interest on the said refund, from the expiry of period of three months till the actual date of payment of such refund amount. The Learned Commissioner (Appeals) has merely rejected the claim of interest on the sole ground that the provisions of Section 11-BB were introduced in the Act only w.e.f. 26 May, 1995 and as the application for refund was made on 29.12.1989, the same would not apply to the said refund application - but in terms of the proviso to said Section 11-BB, the revenues interest liability would start accruing after the expiry of period of 3 months from 26 May, 1995. Matter remanded to Original Adjudicating Authority for calculation of the interest to be paid to the appellant - appeal allowed by way of remand.

Summary

Issues:
Refund of duty paid on exported goods, rejection of refund claim, interest on refund amount, applicability of Section 11-BB of Central Excise Act, 1944, liability of revenue to pay interest on delayed refund.

Analysis:
The case involves the appellant, engaged in manufacturing Detergent Powder for export, seeking a refund of duty paid on inputs used in the manufacturing process. Initially, the refund claim was rejected by the Original Adjudicating Authority, and this decision was upheld by the Commissioner (Appeals). However, the Tribunal, in its order dated 20.04.2015, set aside the Original Adjudicating Authority's decision and allowed the appeal with consequential relief.

Upon receiving the Tribunal's order, the appellant approached the revenue for the refund amount, which was partially sanctioned. The issue arose regarding the appellant's claim for interest on the refunded amount, which was rejected. The Commissioner (Appeals) noted that interest should be paid from the date prescribed under Section 11-BB of the Central Excise Act, 1944. However, as the refund application was filed in December 1989, before the introduction of Section 11-BB, the Commissioner rejected the claim for interest.

The appellate authority initially acknowledged the liability to pay interest under Section 11-BB but rejected the claim due to the application being filed before the provision's enactment. The Tribunal highlighted the proviso to Section 11-BB, stating that interest is payable if the refund application is not decided within three months from the relevant date. The Tribunal found that the revenue's interest liability would start accruing after three months from 26 May 1995, the date of the provision's introduction.

Referring to a Supreme Court decision, the Tribunal emphasized that the revenue's interest liability begins after three months from the refund application date. Therefore, the Tribunal held that interest should be calculated from the expiry of three months from 26 May 1995. The impugned order was set aside, and the matter was remanded to the Original Adjudicating Authority for the calculation of interest owed to the appellant based on the Tribunal's decision.