Entitlement to Interest for Delayed Rebate Claims Under Central Excise Act

The respondents, M/s. Dujodwala Resins & Terpenes Ltd., were entitled to interest under Section 11BB of the Central Excise Act, 1944, for delayed sanctioning of rebate claims. The Supreme Court clarified that interest becomes payable after three months from the date of receipt of the refund application. The Government upheld the order granting interest, rejecting the revision application.

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Issues Involved:
1. Entitlement to rebate claims under Notification No. 56/2002-C.E.
2. Delay in sanctioning rebate claims and entitlement to interest under Section 11BB of Central Excise Act, 1944.

Issue-wise Detailed Analysis:

1. Entitlement to Rebate Claims under Notification No. 56/2002-C.E.:

The respondents, M/s. Dujodwala Resins & Terpenes Ltd., submitted rebate claims for duty paid on exported goods, which were initially not sanctioned because they were availing exemption benefits under Notification No. 56/2002-C.E. The rebate claims were sanctioned only after the enactment of the Finance Bill, 2008, which amended Rule 18 of the Central Excise Rules, 2002, with retrospective effect. This amendment allowed the rebate of duty paid on excisable goods cleared for export, even if the refund had been granted under certain notifications issued under Section 5A of the Central Excise Act, 1944. The original authority observed that the respondents became eligible for the rebate only after the enactment of the Finance Bill, 2008, and hence, the rebate was sanctioned within a month of the enactment.

2. Delay in Sanctioning Rebate Claims and Entitlement to Interest under Section 11BB:

The respondents argued that they were entitled to interest on the delayed rebate claims as per Section 11BB of the Central Excise Act, 1944. The Commissioner (Appeals) set aside the original order and allowed the respondents' appeal, observing that the refund must be disbursed within three months from the date of application submission. The department contested this, arguing that the rebate claims became legally payable only after the amendment of Rule 18 by the Finance Act, 2008, and hence, there was no delay in sanctioning the rebate.

The Government reviewed the case records and noted that the rebate claims were submitted on 20-11-2006 and 19-1-2007, respectively. The claims were not sanctioned initially due to the exemption under Notification No. 56/2002-C.E. The retrospective amendment of Rule 18 validated the rebate claims, making them admissible for the period from 1-3-2002 to 7-12-2006. The Government observed that the amendment did not put any bar on the payment of interest in terms of Section 11BB for delayed payment of refund claims.

The Supreme Court judgment in Ranbaxy Laboratories Ltd. v. UOI clarified that interest under Section 11BB becomes payable on the expiry of three months from the date of receipt of the application for refund, regardless of when the order for refund is made. This principle was reiterated in another case involving M/s. Jindal Drugs, where the Bombay High Court upheld that interest is payable after three months from the date of receipt of the refund/rebate application.

The Government concluded that the department's argument that interest would arise only after three months from the amendment does not hold good. The liability to pay interest under Section 11BB commences from the expiry of three months from the date of receipt of the application for refund under Section 11B(1) of the Act. Therefore, the Government found no infirmity in the impugned order-in-appeal and upheld the same, rejecting the revision application as devoid of merit.

Conclusion:

The revision application was rejected, and it was ordered that the respondents are entitled to interest under Section 11BB of the Central Excise Act, 1944, for the delayed sanctioning of rebate claims. The liability to pay interest commences from the expiry of three months from the date of receipt of the application for refund.

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