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TMI Blog2025 (1) TMI 1256X X X X Extracts X X X X X X X X Extracts X X X X ..... d as per section 11BB. It is observed that while making the above substitution w.e.f. 06.08.2014 specifically by proviso to Section 35F and Section 35FF, it has been stated that the amount deposited under Section 35F of the Act, prior to commencement of Finance Act, 2014, will be governed by provision of Section 35F as it existed before the commencement. In view of the specific provision made in the Act, the refund claim of the deposit made will have to be considered in terms of Section 35FF as it existed on the date of deposit and the interest will be paid at the rate specified in Section 11BB after expiry of three months from the date of communication of the order of the Appellate Authority till the date. Reliance placed on the decision of the Hon'ble Supreme Court in the case of Sandvik Asia [2006 (1) TMI 55 - SUPREME COURT]. Interpreting the above decision of Hon'ble Supreme various benches of tribunal have concluded in the favour of the grant of interest form the date of deposit and at the rate of 12% (though not provided by the statute or any Notification issued in terms of Section 11BB or Section 35FF of the Central Excise Act, 1944). However it may also be noted that thes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or interest from the date of deposit till granted. In fact the appellants are entitled for the interest @12% on the amount refunded i.e. Rs.50,00,000 from the date of deposit till granted. * the appellants are relying upon the following decisions in this regard: * Modern Threads India Ltd Vs CCE & CGST [2024 (7) TMI 7 (CESTAT ND)]. * Indore Treasure Market City Pvt. Ltd. Vs CCE & CGST [(2024) 20 CENTAX 469 (Tri.-Del)]. * CCE & CGST Vs Indore Treasure Market City Pvt. Ltd. [(2024) 20 CENTAX 470 (MP)]. * CC Vs Khanna Paper Mills Ltd. [2024 (7) TMI 1411 (CESTAT Chd.)]. * Shri Rathi Steel Ltd. Vs Commr CGST [2024 (6) TMI 377 (CESTAT Alld.)]. * Kumawat Contractors Vs Commr CGST [2023 (3) TMI 1230 (CESTAT ND)]. * Impressive Management Solution Pvt. Ltd. Vs. CGST [2023 (4) TMI 433 (CESTAT Chd.)] * Raghuveer Metal Industries Ltd. Vs. Commr. CGST [2023 (12) TMI 371 (CESTAT ND)]. * Shree Rajasthan Syntex Ltd. Vs. Commr. CGST [2023 (7) TMI 950 (CESTAT ND)]. * Matta Paints And Hardware Store Vs. CCT [2022 (12) TMI 93 (CESTAT ND)]. * Parle Agro Pvt. Ltd. Vs. CCE [2021-TIOL-306-CESTAT-AII]. * Riba Textile Ltd. Vs. CCE [2020-TIOL-932-CESTAT-CHD]. * CCE Vs. Riba Textile ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tayed by a superior court or tribunal, there shall be paid to the appellant interest at the rate specified in section 11BB after the expiry of three months from the date of communication of the order of the appellate authority, till the date of refund of such amount.". From the perusal of the above section 35F it is evident that the amounts deposited in terms of this section are noting but duty. The use of phrase in this section "pending the appeal, deposit with the adjudicating authority the duty demanded." Further from the perusal of Section 35 FF it is evident that in case the appeal is finally decided in favour of the appellant hen the amount, so deposited under Section 35 F shall be refunded along with interest for period after expiry of period of three months from the date of communication of order of Appellate Authority at the rates specified as per section 11BB. 4.4 These Section were substituted as follow w.e.f. 06.08.2014 by Section 105 of Finance (No 2), Act 2014 (25 of 2014). "35F. Deposit of certain percentage of duty demanded or penalty imposed before filing appeal.-- The Tribunal or the Commissioner (Appeals), as the case may be, shall not entertain any a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act, prior to commencement of Finance Act, 2014, will be governed by provision of Section 35F as it existed before the commencement. In view of the specific provision made in the Act, the refund claim of the deposit made will have to be considered in terms of Section 35FF as it existed on the date of deposit and the interest will be paid at the rate specified in Section 11BB after expiry of three months from the date of communication of the order of the Appellate Authority till the date. In case of Maithan Ceramics Ltd [2021 (378) E.L.T. 265 (A.P.)] Hon'ble Andhra Pradesh High Court has held as follows: "6. We are unable to accept such contention of the appellant for the following reasons : (i) Appellant had made the deposit of duty and penalty in 2006 and at that material point of time, there was no statutory provision in the Customs Act with regard to refund of such deposit. (ii) By Act 18 of 2008, Section 129EE of the Customs Act providing for refund of pre-deposit was introduced into the Customs Act, which reads as follows : Interest on delayed refund of amount deposited under the "129EE. proviso to section 129E. - Where an amount deposited by the appellant in pursu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uld be at a rate specified in Section 129EE (prior to its substitution) and for a period commencing after expiry of three (3) months from the date of communication of the order of the appellate authority till the date of refund. 9. We note that in the rectified order the Tribunal has merely clarified this fact as in its earlier order a wrong provision had been quoted. Hence, we reiterate that the interest on the pre-deposit refunded to the appellant is to be determined as pre-amended Section 129EE of the Customs Act i.e., for a period commencing after expiry of three (3) months from the date of communication of the order of the appellate authority till the refund of such amount and not from the date of deposit of the said amount till the date of refund. 10. Reference to Sandvik Asia Limited (supra) is not apposite. In the said report, the Apex Court was not called upon to decide the impact of amendment to Section 129EE of the Customs Act and was dealing with the issue of refund made under the provisions of the Income-tax Act, 1961." 4.6 In view of such specific provision in the statute, the refund claim for interest has to be examined. It is found that the refund was paid wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce may be made to the decision of this Court in Shreeji Colour Chem Industries (supra), relied upon by the Delhi High Court. It is evident from a bare reading of the decision that insofar as the reckoning of the period for the purpose of payment of interest under Section 11BB of the Act is concerned, emphasis has been laid on the date of receipt of application for refund. In that case, having noted that application by the assessee requesting for refund, was filed before the Assistant Commissioner on 12th January 2004, the Court directed payment of Statutory interest under the said Section from 12th April 2004 i.e. after the expiry of a period of three months from the date of receipt of the application. Thus, the said decision is of no avail to the revenue. 15. In view of the above analysis, our answer to the question formulated in para (1) supra is that the liability of the revenue to pay interest under Section 11BB of the Act commences from the date of expiry of three months from the date of receipt of application for refund under Section 11B(1) of the Act and not on the expiry of the said period from the date on which order of refund is made." 4.7 Appellant has relied upon se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y section 11AA of the Central Excise Act, 1944 (1 of 1944) and in supersession of the notification of the Government of India in the Ministry of Finance (Department of Revenue) No. 5/2011-Central Excise (N.T.), dated the 1st March, 2011 published in the Gazette of India, Extraordinary, Part II, Section 3, sub-section (i), vide, number GSR 136(E), dated the 1st March, 2011, except as respects things done or omitted to be done before such supersession, the Central Government hereby fixes the rate of interest at fifteen per cent per annum for the purpose of the said section. 2. This notification shall come into force from the 1st day of April, 2016. 36. The Notification issued under Section 11BB provides interest at the rate of six per cent per annum. It is reproduced below : Notification No. 67/2003-C.E. (N.T.), dated 12-9-2003 Notification Under Section 11BB Interest @ 6% per annum on delayed refunds. - In exercise of the powers conferred by section 11BB of the Central Excise Act, 1944 (1 of 1944) and in supersession of the notification of the Government of India in the Ministry of Finance (Department of Revenue) No. 17/2002-Central Excise (N.T.), dated the 13th May, 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the rate of interest varies from 6% to 18% in the aforesaid Notifications issued under Sections 11AA, 11BB, 11DD and 11AB of the Excise Act, the grant of interest @ 12% per annum seems to be appropriate." B. Continental Engines Pvt Ltd. [2022 (382) ELT 522 (T-Del)] "7. A perusal makes it clear that the amount of pre-deposit is to be refunded along with the interest which was not below 5% and shall not exceed 36%. No concept of any time-limit is being mentioned in the said provision. Hon'ble Apex Court also has settled this issue in the case of Sandvik Asia Ltd. reported as 2006 (196) E.L.T. 257 (S.C.) holding the assessee entitled for interest along with the refund of the amount which he was not liable to pay to the Department. 8. I also endorse the following findings of the Tribunal in the case of M/s. Parle Agro Pvt. Ltd. reported as 2021-TIOL-306-CESTAT-ALL = 2022 (380) E.L.T. 219 (Tri. - All.) as under : "30. ….. 31. Section 11D of the Excise Act deals with duties of excise collected from the buyer to be deposited with Central Government. It provides that every person who is liable to pay duty and has collected any amount in excess of the duty assessed from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from 94 to 290 days. 3.2 In the circumstances it was prayed inter alia :- "(a) to issue writ of mandamus and/or any other appropriate writ(s) for directions is the Respondents for providing appropriate compensation as well as interest, for delay in the granting of refund;" 4. The first case arises out of Special Civil Application No. 18591 of 2018 filed by M/s. Willowood Chemicals Pvt. Ltd. submitting that said Writ Petitioner was entitled on the basis of Section 16 of the IGST Act read with Section 54 of the CGST Act for compensation in receipt of delayed payment as detailed in Annexure D of the petition, which in turn dealt with 12 refunds with delay ranging between 94 to 290 days. The special civil application had thus prayed for appropriate compensation. 5. In both the petitions it was submitted that inaction leading to inordinate delay in granting refunds was per se arbitrary and that the inordinate delay impacted the working capacity of the Writ Petitioners thereby reducing their ability to conduct business and as such appropriate compensation ought to be awarded along with interest for delay. The submissions were opposed by the Learned Counsel appearing for th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pplicants are entitled to the interest for the delayed payment at the rate of 9% per annum. The authority concerned shall look into the chart provided by the writ applicants, which is at Page 30, Annexure D to the writ application and calculate the aggregate refund, the writ applicants are entitled to 9% per annum interest from the date of filing of the GSTR-38. The respondents shall undertake this exercise at the earliest and calculate the requisite amount towards interest. Let this exercise be undertaken and completed within a period of two months from the date of receipt of the writ of this order. The requisite amount towards the interest shall be paid to the writ applicants within a period of two months from the date of receipt of the writ of this order." 8. The appellant being aggrieved, preferred Review Petitions in both the cases. It was submitted inter alia : "4. It is respectfully submitted that this Hon'ble Court has directed the respondent authority to pay simple interest on the delayed payment at the rate of 9% per annum from the date of filing of the GSTR-3B. 5. It is respectfully submitted that as per section 56 of the IGST Net Interest at the rate of not ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ere the petition is only for the purpose of seeking refund. It has been observed : "We do not consider it proper to extend the principle justifying the consequential order directing the refund of amount illegally realised, when the order under which the amounts had been collected has been set aside, to cases in which only orders for the refund of money are sought. The parties had the right to question the illegal assessment orders on the ground of their illegality or unconstitutionality and, therefore, could take action under Article 226 for the protection of their fundamental right, and the courts, on setting aside the assessment orders, exercised their jurisdiction in proper circumstances to order the consequential relief for the refund of the tax illegally realised. We do not find any good reason to extend this principle and, therefore, hold that no petition for the issue of a writ of mandamus will be normally entertained for the purpose of merely ordering a refund of money to the return of which the petitioner claims a right." 7. The Court has emphasised that there was no legal right in the appellant who had filed the writ petition to claim the refund under the relevant st ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fore, not maintainable. The observations in Suganmal [AIR 1965 SC 1740] related to a claim for refund of tax and have to be understood with reference to the nature of the claim made therein. The decision in Suganmal [AIR 1965 SC 1740] has been explained and distinguished in several subsequent cases, including in U.P. Pollution Control Board v. Kanoria Industrial Ltd. [(2001) 2 SCC 549] and ABL International Ltd. v. Export Credit Guarantee Corpn. of India Ltd. [(2004) 3 SCC 553] The legal position becomes clear when the decision in Suganmal [AIR 1965 SC 1740] is read with the other decisions of this Court on the issue, referred to below : (i) Normally, a petition under Article 226 of the Constitution of India will not be entertained to enforce a civil liability arising out of a breach of a contract or a tort to pay an amount of money due to the claimants. The aggrieved party will have to agitate the question in a civil suit. But an order for payment of money may be made in a writ proceeding, in enforcement of statutory functions of the State or its officers. (Vide Burmah Construction Co. v. State of Orissa [AIR 1962 SC 1320 : 1962 Supp (1) SCR 242]). (ii) If a right has been i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e unconstitutional or invalid, refund is not an automatic consequence but may be refused on several grounds depending on facts and circumstances of a given case. (Vide U.P. Pollution Control Board v. Kanoria Industrial Ltd. [(2001) 2 SCC 549]) (vi) Where the lis has a public law character, or involves a question arising out of public law functions on the part of the State or its authorities, access to justice by way of a public law remedy under Article 226 of the Constitution will not be denied. (Vide Sanjana M. Wig v. Hindustan Petroleum Corporation Ltd. (2005) 8 SCC 242) We are therefore of the view that reliance upon Suganmal was misplaced to hold that the writ petition filed by the appellant was not maintainable." 16. We, therefore, proceed to consider the merits. Turning to the basic question it must be noted that in the following cases, this Court dealt with the question as to payment of interest on the amount due by way of refund : (A) In Modi Industries Ltd. and Another v. Commissioner of Income Tax and Another [(1995) 6 SCC 396] a Bench of three Judges of this Court was called upon to consider the effect of Section 214 of the Income-tax Act, 1961, and the quest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . No interest is at all paid on excess amount of tax collected by deduction at source. Before introduction of Section 244(1A) the assessee was not entitled to get any interest from the date of payment of tax upto the date of the order as a result of which excess realisation of tax became refundable. Interest under Section 243 or Section 244 was payable only when the refund was not made within the stipulated period upto the date of refund. But, if the assessment order was reduced in appeal, no interest was payable from the date of payment of tax pursuant to the assessment order to the date of the appellate order. Therefore, interpretation of Section 214 or any other section of the Act should not be made on the assumption that interest has to be paid whenever an amount which has been retained by the tax authority in exercise of statutory power becomes refundable as a result of any subsequent proceeding. (Emphasis supplied) (B) In Godavari Sugar Mills Ltd., a Bench of two Judges of this Court considered the question whether interest on the compensation amount at the rate of 9 per cent per annum could be awarded when the terms of Section 6 of the Maharashtra Agriculture Lands ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Act provides for determination of compensation and apportionment thereof. Section 26 deals with mode of payment of amount of compensation and the same is extracted below : "26. Mode of payment of amount of compensation. - (1) The amount of compensation may, subject to the provisions of subsection (3), be payable in transferable bonds carrying interest at three per cent per annum. (2) The bonds shall be - (a) of the following denominations, namely - Rs. 50; Rs. 100; Rs. 200; Rs. 500; Rs. 1000; Rs. 5000 and Rs. 10,000; and (b) of two classes - one being repayable during a period of twenty years from the date of issue by equated annual instalment of principal and interest, and the other being redeemable at par at the end of a period of twenty years from the date of issue. It shall be at the option of the person receiving compensation to choose payment in one or other class of bonds, or partly in one class and partly in another. (3) Where the amount of compensation or any part thereof, cannot be paid in the aforesaid denomination, it may be paid in cash." (Emphasis supplied) The said section contemplates the payment of compensation with interest at 3% per annum in an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ter was considered thus : "3. In order to answer the aforesaid issue before us, we have carefully gone through the judgment of this Court in Sandvik case [Sandvik Asia Ltd. v. CIT, (2006) 2 SCC 508] and the order of reference. We have also considered the submissions made by the parties to the lis. 4. We would first throw light on the reasoning and the decision of this Court on the core issue in Sandvik case [Sandvik Asia Ltd. v. CIT, (2006) 2 SCC 508]. The only issue formulated by this Court for its consideration and decision was whether an assessee is entitled to be compensated by the Income Tax Department for the delay in paying interest on the refunded amount admittedly due to the assessee. This Court in the facts of the said case had noticed that there was delay of various periods, ranging from 12 to 17 years, in such payment by the Revenue. This Court had further referred to the several decisions which were brought to its notice and also referred to the relevant provisions of the Act which provide for refunds to be made by the Revenue when a superior forum directs refund of certain amounts to an assessee while disposing of an appeal, revision, etc. Since there was an inor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... awal of exception without hearing and without reasons and whether the provisions of the Acquisition Act were protected by Article 31(A) of the Constitution and whether they were violative of Article 300(A) of the Constitution?" After dealing with these questions, the reference was answered thus : We, therefore, answer the reference as follows : (a) Section 110 of the Land Reforms Act and the Notification dated 8-3-1994 are valid, and there is no excessive delegation of legislative power on the State Government. (b) Non-laying of the Notification dated 8-3-1994 under Section 140 of the Land Reforms Act before the State Legislature is a curable defect and it will not affect the validity of the notification or action taken thereunder. (c) The Acquisition Act is protected by Article 31A of the Constitution after having obtained the assent of the President and hence immune from challenge under Article 14 or 19 of the Constitution. (d) There is no repugnancy between the provisions of the Land Acquisition Act, 1894 and the Rocrich and Devika Rani Rocrich Estate (Acquisition & Transfer) Act, 1996 (in short "the Acquisition Act"), and hence no assent of the President is war ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aw and whenever a specific provision has been made under the statute such provision has to govern the field." The subsequent decision of the Bench of three Judges in Gujarat Fluoro Chemicals noticed that the grant of interest at the rate of 9 per cent was in the facts of the case in Sandvik Asia Ltd. 19. Since the delay in the instant case was in the region of 94 to 290 days and not so inordinate as was the case in Sandvik Asia Ltd., the matter has to be seen purely in the light of the concerned statutory provisions. In terms of the principal part of Section 56 of the CGST Act, the interest would be awarded at the rate of 6 per cent. The award of interest at 9 per cent would be attracted only if the matter was covered by the proviso to the said Section 56. The High Court was in error in awarding interest at the rate exceeding 6 per cent in the instant matters." 4.5-4.8 …………………………….. 4.10 Hon'ble Delhi High Court has in case of Goldy Engineering Works [Order dated 14.07.2023 in WP (C) 4332/2022] observed as follows: "3. For the sake of brevity, the Court deems it apposite to notice the facts as they o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sue of refund and the interest payable in case of delay is governed by Sections 11B and 11BB. The said provisions are reproduced hereinbelow: - "Section 11-B. Claim for refund of [duty and interest, if any, paid on such duty].-- …. Section 11-BB. Interest on delayed refunds.-- … 22. It would also be pertinent to notice Sections 35F and 35FF in order to highlight the distinction between the statutory scheme underlying refund of duty and the return of a pre-deposit made in connection with an appeal that may be preferred. Those two provisions are extracted hereinbelow: - "Section 35-F. Deposit of certain percentage of duty demanded or penalty imposed before filing appeal.--The Tribunal or the Commissioner (Appeals), as the case may be, shall not entertain any appeal-- (i) under sub-section (1) of Section 35, unless the appellant has deposited seven and a half per cent of the duty, in case where duty or duty and penalty are in dispute, or penalty, where such penalty is in dispute, in pursuance of a decision or an order passed by an officer of Central Excise lower in rank than the [Principal Commissioner of Central Excise or Commissioner of Central Excise]; ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in original coming to be set aside in appeal. The petitioner appears to have made an application for refund ultimately and only after the departmental appeal before the CESTAT came to be dismissed. 24. We deem it apposite to observe that the mere pendency of an appeal or an order of stay that may operate thereon would not detract from the obligation of any person claiming a refund making an application as contemplated under Section 11B(1) within the period prescribed and computed with reference to the "relevant date". We do so observe in light of the indubitable principle that an order of stay that may operate in an appeal does not efface the demand or the obligation of refund that may have sprung into existence. It merely places the enforcement of the order appealed against in abeyance. The order of stay would, in any case, be deemed to have never existed once the appeal comes to be dismissed. 25. We further note that the subject of interest on delayed refund which is governed by Section 11BB itself prescribes the starting point for payment of interest on delayed refunds to be the date when an application under Section 11B(1) is received. On a conjoint reading of Sections 11 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot been passed on. Absent that declaration, any refund that may be made would itself amount to the assessee being unjustly enriched. The making of an application and a declaration to the aforesaid effect is thus not merely an empty formality. This too appears to reinforce the imperatives of an application being formally made before a claim for refund is considered. 30. That only leaves the Court to consider the decisions which were cited by Mr. Mishra for our consideration. However, before proceeding to do so, we deem it pertinent to enter the following prefatory observations. A levy of interest on refund must undoubtedly follow where it is found that the amount has been unjustifiably retained or remitted with undue delay. The respondents cannot be permitted to retain moneys which are otherwise not due or are otherwise liable to be returned. The solitary question which stands raised in these matters is the date from which that interest would flow. In Shri Jagdamba Polymers, the High Court on facts had found that the refund was inordinately delayed even though a claim for the same had been promptly lodged. This is clearly evident from Para 7 of the report. The said decision is th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 000/- deposited by the petitioner pursuant to the above order dated 6th December, 2013 was towards the demand raised from the petitioner in respect of the outstanding dues of GSL (India) Limited, as a necessary corollary, such amount is required to be returned to the petitioner in the light of the judgment and order dated 26th September, 2014. Insofar as the demand for interest at the rate of 18% per annum of such amount is concerned, this Court while passing the order dated 6th December, 2013 had not specified that the petitioner would be entitled to refund of the amount with interest if it succeeded in the petition. The amount deposited by the petitioner is pursuant to an interim order passed by the Court and is not in the nature of payment of excise duty and hence, the provisions of the Central Excise Act for refund would not be applicable. Consequently, the provisions of Section 11BB of the Central Excise Act which provides for interest on delayed refund, would not be applicable. It is settled legal position that in the absence of a statutory provision entitling the assessee to interest, a mandamus cannot be issued to the Revenue to pay interest. Therefore, though the petitione ..... X X X X Extracts X X X X X X X X Extracts X X X X
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