Rebate sanction and refund interest: challenge fails where prior revision order stands, and interest runs after three months under Section 11BB.

A departmental challenge to a rebate sanction could not be maintained where the earlier revision order had remained operative, having neither been stayed nor set aside; the authority was functus officio in relation to that order, and the rebate sanction stood upheld. On interest for delayed refund, Section 11BB provides that interest accrues if refund is not paid within three months of receipt of the refund application. An appellate order sanctioning refund does not postpone that commencement date. Interest was therefore payable from the expiry of three months after receipt of the refund application.

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Issues: (i) Whether the departmental challenge to the rebate sanction could survive after the earlier revision order had not been stayed or set aside. (ii) Whether interest on the delayed rebate/refund was payable from the date of the original refund application or only from the date of the appellate order sanctioning the refund.

Issue (i): Whether the departmental challenge to the rebate sanction could survive after the earlier revision order had not been stayed or set aside.

Analysis: The rebate sanction in the second round was made pursuant to the earlier revision order. That order remained operative and had neither been stayed nor set aside. The subsequent departmental appeal sought to reopen the same question. In these circumstances, the authority held that the challenge was not maintainable and that it had become functus officio in relation to the earlier order.

Conclusion: The departmental challenge to the rebate sanction was not maintainable and the rebate sanction was upheld.

Issue (ii): Whether interest on the delayed rebate/refund was payable from the date of the original refund application or only from the date of the appellate order sanctioning the refund.

Analysis: Section 11BB provides for interest if refunded duty is not paid within three months from the date of receipt of the refund application. The Explanation deems an appellate or court order granting refund to be an order under Section 11B, but it does not postpone the commencement of interest. Applying the settled principle of strict construction of fiscal legislation and the governing Supreme Court ruling, the liability to pay interest begins after three months from receipt of the refund application, not from the date of the later sanction order.

Conclusion: Interest was payable from the expiry of three months from the date of receipt of the refund application.

Final Conclusion: Both revision applications failed, the rebate sanction remained undisturbed, and the assessee was held entitled to interest for delayed refund in accordance with Section 11BB.

Ratio Decidendi: Under Section 11BB of the Central Excise Act, 1944, interest on refundable duty begins to run three months after receipt of the refund application, and an appellate order sanctioning the refund does not shift that starting point.

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