2019 (11) TMI 244 - HC - Central Excise

Interest on Refund - Section 11BB of the Central Excise Act, 1944 - time limitation - respondent contended that interest was paid within three (03) months from the date of order passed by the Tribunal, thus department is not liable to pay interest - HELD THAT - As per Section 11BB of the Central Excise Act, 1944, if duty is not refunded within three (03) months from the date of application, applicant is entitled to interest. In the present matter, refund application was filed on 03.09.2009 which was rejected and the petitioner unsuccessfully assailed said order before Commissioner (A). The petitioner filed further appeal before the Tribunal which vide order dated 21.02.2018 (Annexure P-3) allowed appeal of the petitioner and accordingly, the respondent sanctioned refund on 27.09.2018. Hon'ble Supreme Court in the case Ranbaxy Laboratories Ltd. Versus Union of India, 2011 (10) TMI 16 - SUPREME COURT has clearly held that interest is payable from the expiry of three months from the date of filing refund application and not from the date of favourable order of Appellate Authority. From the reading of Section 11BB, it is quite apparent that liability of interest relates back to date of filing application and not date of order passed by one or another authority. As the respondents failed to sanction refund within three (03) months from the date of application, thus they are liable to pay interest for the delayed period - In the present case, refund application was filed on 03.09.2009 (P-1) which was rejected by the respondent vide order dated 30.04.2010. The refund was ultimately sanctioned on 27.09.2018 when the Tribunal allowed appeal of the petitioner, thus, respondents are liable to pay interest w.e.f. expiry of three (03) months from 03.09.2009. The respondents are hereby directed to pay interest at prescribed rate within one (01) month from the date of receipt of certified copy of this order, failing which the Sanctioning/Competent Officer shall be liable to pay interest @ 6% on the amount due from his/her own pocket, apart from liable to be hauled up in contempt proceedings - petition allowed.

Summary

Issues Involved:
1. Quashing of order declining interest payable under Section 11BB of the Central Excise Act, 1944.
2. Entitlement to interest on delayed refund under Section 11BB.
3. Interpretation of Section 11BB in relation to the date of filing the refund application.

Issue-wise Detailed Analysis:

1. Quashing of Order Declining Interest Payable under Section 11BB:
The petitioner sought quashing of the order dated 27.09.2018 by the Assistant Commissioner, CGST, Yamuna Nagar, which declined interest payable under Section 11BB of the Central Excise Act, 1944, even though the principal amount had been refunded. The court allowed the application to place on record the reply by way of affidavit from the Commissioner of CGST, Panchkula.

2. Entitlement to Interest on Delayed Refund under Section 11BB:
The petitioner was engaged in importing and domestically procuring Zinc Ash, converting it into Zinc Ingots and Zinc Sulphate. Due to a change in the tariff classification of Zinc Sulphate, Central Excise duty became payable from 01.01.2007. The petitioner deposited the duty amount by reversing Cenvat Credit following a show cause notice. Subsequently, a notification exempted Zinc Sulphate retrospectively from 01.01.2007, prompting the petitioner to file a refund application on 03.09.2009. The refund application was initially rejected and later allowed by the Tribunal on 21.02.2018. The petitioner requested the refund along with interest, but the respondent only sanctioned the refund without interest. The petitioner argued that the matter was covered by the Supreme Court judgment in Ranbaxy Laboratories Ltd. Versus UOI, which mandates interest on delayed refunds.

3. Interpretation of Section 11BB in Relation to the Date of Filing the Refund Application:
The court examined Section 11BB, which stipulates that if duty is not refunded within three months from the date of the refund application, interest is payable. The court referenced the Supreme Court judgment in Ranbaxy Laboratories Ltd. Versus UOI, which clarified that interest under Section 11BB is payable from the expiry of three months from the date of the refund application, not from the date of a favorable order by an appellate authority. The court emphasized that the liability to pay interest relates back to the date of filing the refund application. In this case, the refund application was filed on 03.09.2009, and the refund was sanctioned on 27.09.2018. Therefore, the respondents were liable to pay interest from three months after 03.09.2009.

Conclusion:
The petition was allowed, directing the respondents to pay interest at the prescribed rate within one month from the receipt of the certified copy of the order. Failure to comply would result in the Sanctioning/Competent Officer being liable to pay interest at 6% from their own pocket and potential contempt proceedings.