Delayed refund of unutilized CENVAT credit attracts statutory interest, and a new appellate ground cannot defeat the claim.

Refund of unutilized CENVAT credit under Rule 5 was treated as equivalent to refund of duty for Section 11B and the statutory interest consequence under Section 11BB, so interest became payable automatically where sanction was delayed beyond three months from the refund application until payment. The appellate authority also could not deny interest on a new ground that the original refund sanction had not been challenged and had attained finality, because that basis was outside the original adjudication order. The denial of interest was therefore set aside and consequential relief followed in favour of the assessee.

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Issues: (i) Whether interest was payable on delayed sanction of refund of unutilized CENVAT credit claimed under Rule 5 of the CENVAT Credit Rules, 2004; (ii) whether the appellate authority could deny interest on a ground not taken in the original adjudication order.

Issue (i): Whether interest was payable on delayed sanction of refund of unutilized CENVAT credit claimed under Rule 5 of the CENVAT Credit Rules, 2004.

Analysis: Refund of unutilized CENVAT credit was treated as equivalent to refund of duty for the purpose of Section 11B and the statutory interest consequence under Section 11BB. The settled view relied on by the Tribunal recognized that once refund is sanctioned beyond the prescribed period, interest follows automatically from the expiry of three months from the refund application until payment is made. The Tribunal also followed its earlier decision granting interest on delayed refund of such credit.

Conclusion: Interest was held payable on the delayed refund of unutilized CENVAT credit, in favour of the assessee.

Issue (ii): Whether the appellate authority could deny interest on a ground not taken in the original adjudication order.

Analysis: The appellate authority rejected the claim on a fresh ground that the original refund sanction had not been challenged and had attained finality. The Tribunal held that this basis was beyond the scope of the original order and could not sustain the denial of consequential interest. The appellate order was therefore found to be legally unsustainable.

Conclusion: The appellate authority could not introduce a new ground to the interest claim, in favour of the assessee.

Final Conclusion: The denial of interest was set aside and the appeal was allowed with consequential relief, if any.

Ratio Decidendi: Where refund of unutilized CENVAT credit is sanctioned belatedly, statutory interest becomes payable as a consequential relief, and an appellate authority cannot sustain denial of such interest on a ground not contained in the original adjudication order.

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