2022 (12) TMI 974 - HC - Central Excise

Interest on delayed refunds - inordinate delay and latches on the part of the respondent in not processing the refund claims of the petitioner within the prescribed period of three months from the date of receipt of the applications of the petitioner as contemplated under Section 11-BB of the Central Excise Act, 1944 - HELD THAT - The question with regard to payment of interest on delayed refunds sanctioned beyond the prescribed period of three months from the date of receipt of an application is no longer res-integra in view of the judgments of the judgments of the Apex Court, this Court and other High Courts - Reliance can be placed in the case of M/S. DEE KAY EXPORTS THROUGH ITS PARTNER SH. BALJINDER SINGH, 24, INDUSTRIAL ESTATE, YAMUNA NAGAR (HARYANA) VERSUS UNION OF INDIA AND OTHERS 2019 (11) TMI 244 - PUNJAB AND HARYANA HIGH COURT , where it was held that 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. It is clear that in the instant case, in the light of the undisputed fact that the respondent has not sanctioned refund within the prescribed period of three months from the date of submission of the refund request by the petitioner, the respondent would be liable to pay interest in favour of the petitioner on the amounts ordered to be refunded in favour of the petitioner - In the instant case, it is an undisputed fact that the respondent did not pass the refund sanction order within the prescribed period of three months and the delay on the part of the respondent in not passing the refund sanction order cannot be attributed or attributable to the petitioner, particularly when the adjudicatory process had to be mandatorily completed within the period of three months. It is significant to note that merely because there were certain deficiencies/lacunae in the refund claim by the petitioner, the said circumstance cannot be relied upon nor made the basis by the respondent in order to contend that it was entitled to pass the refund sanction order beyond the prescribed statutory period of three months. The respondent completely misdirected itself in coming to the erroneous conclusion that the period of three months would start running from the date of the final submission made by the petitioner and not from the date of submission of the refund claim and this finding, which is not only contrary to the provisions of Section 11-B and 11-BB of the said Act of 1944, but also the circular dated 01.10.2002 - Petition allowed.

Summary

Issues Involved:
1. Entitlement to interest on delayed refunds under Section 11BB of the Central Excise Act, 1944.
2. Legality of the respondent's rejection of the petitioner's claim for interest due to alleged deficiencies in the refund application.

Detailed Analysis:

1. Entitlement to Interest on Delayed Refunds:
The petitioner sought a writ of certiorari to quash the impugned order rejecting the request for interest on delayed refunds amounting to Rs. 11,33,55,127/- under Section 11BB of the Central Excise Act, 1944, read with Section 83 of the Finance Act, 1994. The petitioner argued that the respondent failed to process the refund claims within the prescribed three-month period, thus entitling the petitioner to interest on the delayed refunds. The petitioner cited various judgments from the Apex Court, High Courts, and circulars to support the claim that the three-month period is mandatory and any delay beyond this period automatically entitles the claimant to interest.

2. Legality of the Respondent's Rejection:
The respondent contended that the delay was due to discrepancies and lacunae in the refund applications, which required the petitioner to furnish additional details and documents. The respondent argued that the refunds were sanctioned within three months from the date of final submission of the corrected applications, thus negating any liability to pay interest. The respondent's position was that the prescribed period of three months should start from the date of the final submission, not the initial application.

Court's Findings:
The court examined the relevant judgments and circulars, noting that the issue of interest on delayed refunds is well-settled. The court emphasized that the three-month period prescribed in Section 11BB is mandatory and any delay beyond this period, regardless of whether it is intentional or unintentional, obligates the authority to pay interest. The court referred to several precedents, including the Supreme Court's rulings in Ranbaxy Laboratories Ltd. vs. Union of India and Union of India vs. Hamdard (Waqf) Laboratories, which held that the period for interest calculation starts from the date of the original refund application, not the date of rectification.

The court rejected the respondent's argument that deficiencies in the applications justified the delay. It clarified that deficiencies should be addressed within the prescribed period, and failure to do so does not extend the statutory period. The court highlighted that the respondent's failure to process the refunds within three months constituted a breach of statutory duty, entitling the petitioner to interest.

Conclusion:
The court allowed the petition, setting aside the impugned order and directing the respondent to pay interest at the rate of 6% per annum on the delayed refunds from the date of the original refund application. The respondent was instructed to comply with this order within three months.

Order:
(i) Petition allowed.
(ii) Impugned order dated 11.03.2021/18.03.2021 set aside.
(iii) Respondent directed to pay interest at 6% per annum on delayed refunds within three months from the date of receipt of the court's order.