2021 (6) TMI 462 - AT - Service Tax

Interest on delayed refund - relevant date - to be calculated from the date of expiry of three months with effect from the date of receipt of application for refund or on expiry of the said period with effect from the date on which the order of refund is made - section 11BB of Central Excise Act, 1944 - Circular 398/31/98 dated 2.6.1998 - HELD THAT - A close reading of Section 11BB, which now governs the question relating to payment of interest on belated payment of interest, makes it clear that relevant date for the purpose of determining the liability to pay interest is not the determination under subsection (2) of Section 11B to refund the amount to the applicant and not to be transferred to the Consumer Welfare Fund but the relevant date is to be determined with reference to date of application laying claim to refund - The non-payment of refund to the applicant claimant within three months from the date of such application or in the case governed by proviso to Section 11BB, non-payment within three months from the date of the commencement of Section 11BB brings in the starting point of liability to pay interest, notwithstanding the date on which decision has been rendered by the competent authority as to whether the amount is to be transferred to Welfare Fund or to be paid to the applicant needs no interference. Circular 398/31/98 dated 2.6.1998 has also been appraised wherein the Board has directed that the responsibility should be fixed for not dispensing for refund /rebate claims within three months from the date of receipt of application. The Board stressed with the provision of section 11BB of Central Excise Act 1944 are attracted automatically for no refund sanction beyond the period of three months hence the jurisdictional Central Excise officer were directed to not to wait of instructions from any superior officer and to ensure that no interest liability is attracted - In the present case such application is the one as was filed on 24.6.2006 which was the first application filed under section 11B(1) of the Act. The appellant is entitled for interest on the entire refund amount with effect from 24.6.2006 - Appeal allowed - decided in favor of appellant.

Summary

Issues Involved:
1. Entitlement to interest on delayed refund.
2. Calculation of interest commencement date under Section 11BB of the Central Excise Act, 1944.

Issue-wise Detailed Analysis:

1. Entitlement to Interest on Delayed Refund:
The appellant, a partnership firm engaged in educational coaching, was subjected to a service tax demand of ?3,25,270/- following a search by Service Tax authorities. The demand was confirmed and partially adjusted. Subsequent appeals led to partial rejections and remands by higher authorities, including the High Court. The appellant filed multiple refund claims for amounts paid under protest, which were initially rejected but later allowed by CESTAT. However, the refunded amounts were adjusted against pending demands. The appellant sought interest on the delayed refund, which was partially granted by the Commissioner (Appeal) but only for specific periods. The appellant contended that interest should be calculated from the date of the original refund claim filed on 20.6.2006, arguing that the department caused unnecessary harassment by delaying the refund.

2. Calculation of Interest Commencement Date Under Section 11BB:
The core issue was whether the interest liability under Section 11BB of the Central Excise Act, 1944, should commence from the date of expiry of three months from the receipt of the refund application or from the date of the refund order. Section 11BB stipulates that interest is payable if the refund is not made within three months from the date of the refund application. The department argued that the interest should be calculated from the date of the refund order, not the application date. However, the tribunal referred to Section 11BB and relevant circulars, which clarified that the interest liability starts from three months after the receipt of the refund application. The tribunal emphasized that the legislative intent and consistent departmental interpretation support this view. The tribunal cited precedents, including the Supreme Court's decision in Union of India vs. Hamdard (Waqf) Laboratories and Ranbaxy Laboratories Limited vs. Union of India, which affirmed that interest is payable from three months after the refund application date, regardless of the refund order date.

Conclusion:
The tribunal concluded that the appellant is entitled to interest on the entire refund amount from 24.6.2006, the date of the original refund application. The order under challenge was set aside for incorrectly calculating interest from different dates for different amounts. The appeal was allowed, and the tribunal ordered the recalculation of interest from the correct date. The judgment underscores the importance of adhering to statutory provisions and consistent departmental interpretations regarding interest on delayed refunds.