Refund interest under Section 11BB runs after three months, and a final appellate refund order must be implemented.

Interest on sanctioned refund under Section 11BB of the Central Excise Act becomes payable from the expiry of three months after receipt of the refund application, and that liability follows by operation of law even if the claim was earlier litigated. Where the refund is ultimately sanctioned after that statutory period, prior rejection does not displace the interest consequence. A final appellate order granting refund, once unchallenged and final, must be given full effect, and it cannot be disturbed on the basis of the non-retrospective application of a Board circular. The assessee obtained interest, while the Revenue's challenge to the refund failed.

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Issues: (i) Whether interest on the sanctioned refund was payable under Section 11BB of the Central Excise Act, 1944 from the expiry of three months from the date of the refund application. (ii) Whether the refund sanctioned by the appellate authority could be disturbed on the ground that the Board's circular was not retrospectively applicable.

Issue (i): Whether interest on the sanctioned refund was payable under Section 11BB of the Central Excise Act, 1944 from the expiry of three months from the date of the refund application.

Analysis: The refund application was filed on 26-12-2002 and the statutory period of three months expired on or about 26-3-2003. Once the refund was ultimately found payable and was sanctioned after the expiry of that period, the entitlement to interest followed by operation of law. The fact that the claim had been rejected at earlier stages and remained under litigation did not displace the statutory consequence under Section 11BB. The liability to pay interest is not dependent on the date of adjudication but on delay beyond the prescribed period after receipt of the refund claim.

Conclusion: Interest under Section 11BB was payable from the expiry of three months after the refund application, and the assessee was entitled to such interest.

Issue (ii): Whether the refund sanctioned by the appellate authority could be disturbed on the ground that the Board's circular was not retrospectively applicable.

Analysis: The appellate order granting refund had not been challenged and had attained finality. In those circumstances, the refund order was required to be given effect to in full. The objection based on the alleged prospective operation of the circular could not override the binding effect of the final appellate determination.

Conclusion: The refund could not be disturbed, and the Revenue's challenge to the refund failed.

Final Conclusion: The assessee succeeded on the claim for interest, while the Revenue's challenge to the refund was rejected, resulting in a partial success for the assessee and final disposal of both appeals.

Ratio Decidendi: Interest on a refund becomes payable under Section 11BB upon expiry of three months from the date of the refund application if the refund is ultimately sanctioned, irrespective of prior litigation, and a final appellate refund order must be implemented once it has attained finality.

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