2022 (12) TMI 563 - AT - Service Tax

Interest on delayed refund u/s 11BB - Cenvat Credit is in the nature of any duty/tax paid by the appellant or not - Refund of unutilized cenvat credit - export of services - Rule 5 of Cenvat Credit Rules, 2004 - HELD THAT - the learned Commissioner ought to have followed the law laid down by the Hon'ble Supreme Court in the matter of Ranbaxy Laboratories 2011 (10) TMI 16 - SUPREME COURT rather than distinguishing it. Learned Commissioner tried to distinguish the aforesaid judgement passed by the Hon'ble Supreme Court by observing that in the said judgment the Hon'ble Supreme Court has ordered interest on delayed refund as duty paid therein was found refundable under section 11BB ibid, whereas in the instant case appellant was sanctioned refund of accumulated Cenvat Credit due to export under Rule 5 ibid which is not in the nature of any duty/tax paid by the appellant which was subsequently found refundable under section 11B. Therefore, according to learned Commissioner the judgement of Hon'ble Supreme Court shall not be applicable in the instant case. Learned Commissioner seems to be not aware of the Principle of Judicial Discipline and in particular Article 141 of the Constitution of India, which provides that the decisions of the Hon'ble Supreme Court are binding on all the Courts in India and all Courts includes quasi-judicial authorities also, therefore he ought to have followed the law laid by the Hon'ble Supreme Court

Summary

Issues:
Whether the appellant is eligible for interest on delayed sanction of refund claim filed under Rule 5 of Cenvat Credit Rules, 2004?

Analysis:
The appeal was filed against the order passed by the Commissioner of Central Tax (Appeals) rejecting the appellant's claim for interest on the delayed sanction of refund under Rule 5 of Cenvat Credit Rules, 2004. The appellant had exported services without payment of Service Tax and claimed a refund of Cenvat Credit accumulated from April 2013 to September 2015. The Tribunal had granted a part of the refund which was later rejected by the Appellate Authority. The appellant requested the Adjudicating Authority for the sanctioned refund, which was granted without any interest despite the delay exceeding three months from the filing date. The Commissioner, relying on a Tribunal decision, rejected the appeal stating that the refund was not in the nature of duty/tax paid by the appellant. However, the appellant argued citing various precedents, including decisions by the Hon'ble Supreme Court and High Courts, supporting their claim for interest on delayed refunds.

The Counsel for the appellant contended that interest on delayed refunds is payable under section 11BB of the Central Excise Act, 1944, after three months from the application date, citing the Hon'ble Supreme Court's decision in M/s. Ranbaxy Laboratories Ltd. vs. UOI. The Commissioner attempted to distinguish the case, stating that the appellant's refund of accumulated Cenvat Credit due to export under Rule 5 was not akin to duty/tax paid and subsequently found refundable under section 11B. However, the Member (Judicial) disagreed, emphasizing that refunds under Rule 5 also fall within the ambit of Section 11BB, citing the decisions of the Hon'ble Gujarat High Court, Hon'ble Madras High Court, and recent decisions by the Hon'ble Karnataka High Court. The Member criticized the Commissioner for not following the principle of Judicial Discipline and Article 141 of the Constitution of India, which mandates adherence to decisions of the Hon'ble Supreme Court by all courts and quasi-judicial authorities.

In light of the above analysis and the precedents cited, the Member allowed the appeal filed by the appellant, granting consequential relief as per the law. The decision was pronounced in open court on 12.12.2022.