2021 (3) TMI 1195 - AT - Service Tax

Entitlement to interest in delayed refund - Section 11 BB of the Central Excise Act, 1944 - HELD THAT - A perusal of the Orders-in Original reveals that the Assistant Commissioner has not granted or even considered the issue of interest under Section 11 BB ibid as correctly pointed out by the Commissioner (Appeals) in the impugned order. But, however, in the impugned order the Commissioner (Appeals) negatives the appellant s claim for interest terming it as Premature . The refund in the case on hand was sanctioned by the sanctioning authority after considering the facts and documents available as on the date of such sanction. So, there was no issue made out while sanctioning the refunds; the interest on the said refund which is a consequence of the refund, cannot be denied on flimsy grounds. This aspect when considered in the light of the dictum of the Hon ble Supreme Court in Ranbaxy Laboratories Ltd. 2011 (10) TMI 16 - SUPREME COURT , leaves no room for any doubt as to the eligibility of the claimant, especially when the refund is sanctioned. Thus appellant is entitled to interest - cases remanded to the file of the Asst. Commissioner/sanctioning authority to workout appropriate interest and sanction the same to the appellant without any further delay, within a period of 3 months of receipt of this order at the concerned Commissionerate - appeal allowed by way of remand.

Summary

Issues:
- Claim for interest under Section 11 BB of the Central Excise Act, 1944 on the refund sanctioned by the authority.

Analysis:

1. The appeals before the forum raised the common issue of whether the appellant is entitled to interest under Section 11 BB of the Central Excise Act, 1944, on the refunds granted. The appellant, engaged in "Business Auxiliary Services" to foreign clients, filed refund claims under Cenvat Credit Rules, 2004, for input services used in providing taxable output services exported out of India. The Orders-in-Original did not address the issue of interest under Section 11 BB, which was highlighted by the Commissioner (Appeals) as being prematurely negated.

2. Citing the case of M/s. Ranbaxy Laboratories Ltd vs Union Of India & Others, the Hon'ble Supreme Court clarified that interest under Section 11BB becomes payable if the claimed amount is not refunded within three months from the application date. The Court emphasized that interest liability commences from the expiry of three months from the application date, irrespective of the authority making the refund order. A circular by the CBEC further stressed the automatic application of Section 11BB for refunds exceeding three months, emphasizing the responsibility to ensure timely disposal of refund claims to avoid interest liability.

3. The judgment concluded that since the refunds were sanctioned after due consideration, the interest on these refunds could not be denied arbitrarily. Following the Supreme Court's ruling, the appellant was deemed eligible for interest on the sanctioned refunds. The cases were remanded to the Asst. Commissioner/sanctioning authority to calculate and grant the appropriate interest without delay, within three months of the order receipt at the concerned Commissionerate. Consequently, the appeals were allowed with any consequential benefits as per the law.

This detailed analysis of the judgment addresses the core issue of interest entitlement under Section 11 BB of the Central Excise Act, 1944, providing a comprehensive understanding of the legal interpretation and implications discussed in the case.