Will settled be unsettled or re-settled?

Interest on delayed refund:

Will settled be unsettled or re-settled?

By:

SOMESH ARORA (ADVOCATE), [Chief Consultant (Amicus Rarus) and Former Commissioner of Customs & Central Excise]

Ever since the provision of paying interest on refunds after a period of three months was brought in various fiscal statutes, the valiant revenue soldiers got into the habit of giving technical objections in case refund was required to be sanctioned and the inefficiency did not permit it to be sanctioned within three months. This phenomenon was seen often in cases, where consequential refunds after winning a litigation was required to be made to an assessee by the Department.  A simple letter close to the end of the three months period to satisfy Department on unjust enrichment or to provide original and not certified copy of any document or file application in a different format was considered enough to take the last date of rectification of such mistakes, by the Department as the date of filing of refund application.  While various courts had different takes on all these technical objections, the matter was settled vide decision of Hon’ble Supreme Court in UNION OF INDIA & OTHERS VERSUS M/S HAMDARD (WAQF) LABORATORIES [2016 (3) TMI 68 - SUPREME COURT], in which Hon’ble Supreme Court laid down various timelines to be followed by the Department and also indicated that Department can reject a refund application but can not drag it unnecessarily on technicalities.  Relevant date for payment of Interest on delayed refund under Section 11BB of Central Excise Act, 1944 was indicated to be on expiry of three months from the date of receipt of application seeking refund and not from the date of removal of defects.  The above decision was followed in APAR INDUSTRIES (POLYMER DIVISION) VERSUS UNION OF INDIA [2015 (12) TMI 1255 - GUJARAT HIGH COURT], stating that for refund/rebate time limit provided under Section 27 of Customs Act, 1962/Section 11BB of Central Excise Act, 1944 must be computed from date of original filing of rebate claim and not from date of re-submission of claim after rectification of mistake/defects.

However, in  CENTRAL MINE PLANNING AND DESIGN INSTITUTE LTD. VERSUS COMMISSIONER OF CENTRAL GOODS AND SERVICE TAX & CENTRAL EXCISE, , BHOPAL [2021 (8) TMI 302 - CESTAT NEW DELHI], decided on 06.08.2021 the Ld. Single Member Bench held that Interest on delayed refund when refund claim filed initially found deficient and after receiving deficiency memo, refund claim complete in all respects was filed on 14.07.2018.  The interest on refund to commence three months after date of removal of deficiency in claim i.e. from 14.07.2018 for Section 11B of Central Excise Act, 1944 as made applicable to Service Tax vide Section 83 of the Finance Act, 1994. The appeal was thus dismissed ignoring the Supreme Court’s decision which to be fair to the bench was never cited before it and old decision as reported in STATE BANK OF INDIA VERSUS COMMISSIONER OF SERVICE TAX, MUMBAI-I [2014 (9) TMI 876 - CESTAT MUMBAI], was followed by it.

This despite the fact, that the same bench with same constitution in the matter of CAPARO ENGINEERING INDIA LTD VERSUS CGST, C.C. & C.E., UJJAIN [2018 (12) TMI 922 - CESTAT NEW DELHI], had earlier decided on 06-12-2018 in Appeal Nos. E/53148-53149 /2018-SM  (by taking cognizance of decision of Apex Court in Union of India Vs. Hamdard (WAQF) Laboratories -cited supra)that it was obligatory on Department’s part to inform deficiencies and defects in the refund application within two days of receipt thereof.  And that no distinction existed in Statute between date of receipt of application and date of receipt of application complete in all respect.  The provision is nowhere expressing about “application” to be called so only in case it is supported by the requisite documents. The law has been settled that the fiscal legislation has to be construed strictly and one has to look merely at what is said in the relevant provision.

It, therefore, appears that due to non-citing of the earlier decisions including of the apex court, the Hon’ble bench has taken an inconsistent view to its own  view in earlier case as also to the latest views of various High Courts and Supreme Court, Union of India Vs. Hamdard Labs. (Cited supra), if so it may be a case for rectification of mistake either suo-moto or on filing of ROM application by the concerned party.