Delayed refund of accumulated Cenvat credit attracts interest, computed only on the unpaid balance remaining from time to time.

Delayed refund of accumulated Cenvat credit under Rule 5 attracts interest under section 11BB of the Central Excise Act because such delay deprives the assessee of money lawfully due. The article states that accumulated credit used for exports and refunded under the Central Excise refund framework carries an interest entitlement when sanction is not timely. It also clarifies that interest is not computed mechanically on the full refund claim throughout the period; where part of the credit continues to be utilised or remains unpaid in stages, interest runs only on the balance outstanding from time to time after the statutory period expires.

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Issues: (i) Whether the assessee was entitled to interest on delayed refund of accumulated Cenvat credit under Rule 5 of the Cenvat Credit Rules, 2002/2004. (ii) Whether interest was to be computed on the entire amount claimed or on the balance amount remaining unpaid from time to time after utilisation.

Issue (i): Whether the assessee was entitled to interest on delayed refund of accumulated Cenvat credit under Rule 5 of the Cenvat Credit Rules, 2002/2004.

Analysis: The refund arose from accumulated Cenvat credit attributable to inputs used in the manufacture of exported goods cleared under bond or LUT. The legal position applied was that refund of such credit is governed by the refund framework under the Central Excise law and delay in sanction of a refundable amount attracts interest under section 11BB of the Central Excise Act, 1944. The Court relied on the principle that interest is compensation for deprivation of money lawfully due and accepted that the assessee was entitled to refund as a matter of law. It also treated the refund of accumulated credit under Rule 5 as falling within the ambit of delayed refund for which interest is payable.

Conclusion: The assessee was entitled to interest on delayed refund.

Issue (ii): Whether interest was to be computed on the entire amount claimed or on the balance amount remaining unpaid from time to time after utilisation.

Analysis: The Court found that the assessee had filed multiple refund claims and had continued to utilise part of the available credit before the refund was actually sanctioned. On that basis, the Court held that interest could not be calculated mechanically on the gross amount claimed throughout the entire period. Instead, the computation had to follow the balance actually outstanding from time to time, with interest running after the statutory period and continuing only on the amount remaining unrefunded until each subsequent utilisation or payment event.

Conclusion: Interest was payable on the outstanding balance from time to time and not uniformly on the full claim amount throughout.

Final Conclusion: The impugned order was set aside and the assessee succeeded in obtaining interest on delayed refund, with the quantum to be worked out on the reduced balance method directed by the Court.

Ratio Decidendi: Delayed refund of accumulated Cenvat credit under Rule 5 attracts interest under section 11BB of the Central Excise Act, 1944, and such interest must be computed on the amount actually remaining unpaid from time to time after the expiry of the statutory period.

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