Court orders payment of interest and costs in delayed refund case.

The court allowed the petition, directing the respondents to pay the petitioner interest of Rs. 3,07,423/- on the delayed refund from 03.06.2008 to 10.03.2010 and compensatory costs of Rs. 25,000/-. The court clarified that interest on interest was not granted but compensation for the delay in receiving statutory interest was awarded.

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Issues Involved:
1. Entitlement to interest on delayed refund for the period from 03.06.2008 to 10.03.2010.
2. Entitlement to interest on interest.
3. Entitlement to compensatory costs for the delay in payment of interest.

Detailed Analysis:

1. Entitlement to Interest on Delayed Refund:
The petitioner sought interest on a delayed refund of Rs. 28,94,776/- for the period from 03.06.2008 to 10.03.2010 under Section 11BB of the Central Excise Act, 1944. The Tribunal had dismissed the petitioner’s appeal, holding that interest was payable only up to 02.06.2008, as the amount was transferred to the Consumer Welfare Fund due to unjust enrichment. However, the court found that Section 11BB mandates interest from three months after the refund application date until the actual refund payment, regardless of any transfer to the Consumer Welfare Fund. The court emphasized that the statutory provisions must be strictly construed and ruled that the petitioner was entitled to interest from 24.04.2005 to 10.03.2010.

2. Entitlement to Interest on Interest:
The petitioner also claimed interest on the interest amount of Rs. 5,40,094/- for the period from 10.03.2010 to 10.11.2010. The court referred to the Supreme Court decision in Commissioner of Income Tax, Gujarat v. Gujarat Fluoro Chemicals, which clarified that only statutory interest could be claimed, not interest on interest. Consequently, the court did not grant this relief.

3. Entitlement to Compensatory Costs:
Given the unnecessary litigation the petitioner had to endure, the court considered the claim for compensatory costs. The court noted that the petitioner had to litigate initially for the refund and subsequently for the interest on the delayed refund. In light of these circumstances, the court awarded compensatory costs of Rs. 25,000/- to the petitioner.

Conclusion:
The petition was allowed. The respondents were directed to pay the petitioner interest of Rs. 3,07,423/- on the delayed refund for the period from 03.06.2008 to 10.03.2010 and compensatory costs of Rs. 25,000/-. The court made it clear that the petitioner was not entitled to interest on interest but was entitled to compensation for the delay in receiving the statutory interest.

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