2020 (2) TMI 179 - AT - Central Excise

Interest on delayed refund - grant of interest denied on the ground that Hon ble CESTAT allowed the appeal of the appellant on the altogether new point and ground which was not existing at the time of rejection of the refund - Section 11BB of the Central Excise Act, 1944 - HELD THAT - Admittedly the refund claim was filed on 29/12/2011 and the same was rejected by the original authority on 27/03/2012 and the appeal against the said order was also rejected by the Commissioner(Appeals) vide order dt. 17/10/2012. Further the Tribunal vide its Final order dt. 12/01/2018 has allowed the appeal of the appellant and in pursuance to the Final order, the original authority sanctioned the refund vide order dt. 02/08/2018 but did not grant interest which was demanded by the appellant for delay in sanctioning the refund. Further, the only ground on which the interest has been denied by the original authority and upheld by the appellant authority is that the CESTAT has allowed the appeal on altogether different ground which was not existing at the time of rejection of refund claim. Further, the appellant has raised the ground of closure of business before the Commissioner(Appeals) and also agitated the same at the time of personal hearing on 09/07/2012 itself and this fact is clearly recorded by the Commissioner(Appeals) in his order dt. 17/10/2012 in para 3 which is reproduced. Once the appellant has taken the ground of closure of factory in the year 2012 itself before the Commissioner(Appeals), then thereafter the adjudicating authority holding that the Tribunal has allowed the appeal on altogether new ground is not sustainable in law. The impugned order is not sustainable in law and the same is set aside by allowing the appeal of the appellant - The original authority will quantify the interest after the expiry of 3 months from the date of filing of the refund claim till the interest is finally sanctioned - appeal allowed by way of remand.

Summary

Issues:
Whether the appellant is entitled to interest on delayed refund under Section 11BB of the Central Excise Act, 1944.

Analysis:

The case involved an appeal against the rejection of a refund claim filed by the appellants, who were engaged in the manufacture of excisable goods. The refund claim was initially rejected by the Refund Sanctioning Authority due to a lack of supporting documents. Subsequent appeals to the Commissioner(Appeals) and the Tribunal resulted in the appeal being allowed based on the ground that the unit/factory was closed in June 2012. The appellant then sought interest under Section 11BB of the Central Excise Act, 1944 for the delay in granting the refund.

The key contention was whether the appellant was entitled to interest on the delayed refund, considering the grounds on which the refund was granted. The appellant argued that the delay in granting the refund should trigger the payment of interest, regardless of the specific grounds for the refund. The appellant also highlighted that the closure of the factory was raised before the Commissioner(Appeals) and during a personal hearing, indicating that it was not a new ground.

The learned AR, representing the respondent, contended that the proof of closure of the business was not provided at the time of filing the refund application. However, the proof was later submitted, showing the closure date as 22/06/2012. The respondent argued that since the refund was sanctioned promptly after the Tribunal's order, there was no delay warranting the payment of interest.

After considering the arguments and the legal provisions, the Hon'ble Member analyzed Section 11BB of the Central Excise Act, 1944, which mandates the payment of interest on delayed refunds. Citing precedents like Ranbaxy Laboratories Ltd. and Jubilant Biosys Ltd., the Member emphasized that the liability to pay interest arises from the date of the refund application, not the date of the order granting the refund. The Member also referred to a Karnataka High Court case for further clarification on the payment of interest.

Ultimately, the Member found that the impugned order, which denied interest based on the grounds of the Tribunal's decision, was not sustainable in law. Relying on the consistent application of the law as per the Ranbaxy Laboratories Ltd. case, the appeal of the appellant was allowed. The original authority was directed to quantify the interest from three months after the filing of the refund claim until the final sanction of interest, remanding the matter for quantification.