Delayed refund interest under section 11BB applies to MODVAT credit claims, with pending claims running from 26.08.1995.

Statutory interest was payable on delayed refund of MODVAT credit under section 11BB of the Central Excise Act, read with section 11B, where the refund was not granted within three months of the refund application. For refund claims already pending when section 11BB came into force, the interest period did not run from the original application date or the appellate order, but from the expiry of three months after 26.05.1995, namely 26.08.1995. The refund had already been sanctioned, so the remaining issue was only verification and computation of interest on that basis.

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Issues: Whether interest was payable under section 11BB of the Central Excise Act, 1944 on delayed refund of MODVAT credit arising under Rule 57F of the erstwhile Central Excise Rules, 1944, and from which date such interest was to be computed for refund claims filed before the insertion of section 11BB.

Analysis: The refund claims were sanctioned, leaving only the claim for interest on delayed payment. The governing law was held to be section 11BB, read with section 11B of the Central Excise Act, 1944, as applied to refunds arising from Rule 57F of the erstwhile Central Excise Rules, 1944. Reliance was placed on the principle that statutory interest is attracted when refund is not made within three months from the date of receipt of the refund application, and that the explanatory deeming provision does not shift the starting point of liability to the date of the appellate order. For claims pending when section 11BB came into force, the proviso applies so that interest runs after the expiry of three months from 26.05.1995, namely from 26.08.1995, rather than from the original application date for those pending claims.

Conclusion: Interest under section 11BB was payable on the delayed refund of MODVAT credit, but for the refund claims pending on the date of insertion of section 11BB, the relevant date for computation was 26.08.1995. The matter was remanded only for verification and computation of the interest amount on that basis.

Ratio Decidendi: Section 11BB makes interest on delayed refund payable from the expiry of three months after receipt of the refund application, and for pending claims on the date of its insertion, from the expiry of three months after 26.05.1995.

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