2020 (2) TMI 604 - AT - Central Excise

Tribunal rules no interest on interest in tax refund claims under Section 11BB.

M/s Diamond Beverages Pvt. Ltd. Versus CCEx., Kolkata VI

The Tribunal upheld the decision rejecting the appellant's claim for interest on interest under Section 11BB of the Central Excise Act, 1944. Citing the ... Demand of interest on interest - appellant is already sanctioned refund alongwith the interest - HELD THAT:- Section 11B of the Central Excise Act, 1944 provides for refund of duty paid. If the refund is not sanctioned within prescribed time limit, a provision has been made under Section 11BB for payment of interest. However, there is no provision for payment of interest on such interest if the interest itself was paid belatedly. The question of law which arises is when there is no explicit provision for payment of interest on interest, whether it can be paid. This question of law was decided by Three Member Bench of the Apex Court in the case of COMMISSIONER OF INCOME TAX, GUJARAT VERSUS GUJARAT FLUORO CHEMICALS [2013 (10) TMI 117 - SUPREME COURT], in which, a batch of SLP were disposed off. Although the case pertains to the income tax, the question of law is identical to the present one inasmuch as where the interest on the refund is paid belatedly, whether the assessee is entitled to interest on such interest, in the absence of any explicit provisions of law for such payment. The appellant is not entitled for interest on interest and there is no infirmity in the impugned order rejecting such a claim for interest on interest - Appeal dismissed - decided against appellant. Issues:1. Entitlement to interest on interest on refund under Section 11BB of the Central Excise Act, 1944.Analysis:The appellant filed an appeal against the Order-in-Appeal No.04/Kol.VI/2009 dated 27.08.2009 passed by the Commissioner of Central Excise (Appeals), Kolkata, seeking interest on the interest amount paid as per Section 11BB of the Central Excise Act, 1944. The appellant's claim for interest on interest was rejected by the first appellate authority, leading to the present appeal. The appellant contended that interest on interest should be paid if the interest on the refund is not paid within the prescribed time limit. The appellant cited various judgments and the order-in-appeal dated 25.03.2008 directing the refund of interest but not interest on interest. The appellant also highlighted the bonafide conduct and absence of dishonesty in its actions. However, the Tribunal referred to the case law Commissioner of Income Tax, Gujarat Vs. Gujarat Fluoro Chemicals, where the Supreme Court held that there is no provision for payment of interest on such interest if the interest itself was paid belatedly. The Tribunal, following the Supreme Court's decision, upheld the impugned order rejecting the claim for interest on interest, ruling that the appellant is not entitled to interest on interest under Section 11BB of the Central Excise Act, 1944.This judgment clarifies the legal position regarding the entitlement to interest on interest on refunds under Section 11BB of the Central Excise Act, 1944. The Tribunal's decision aligns with the Supreme Court's ruling in Commissioner of Income Tax, Gujarat Vs. Gujarat Fluoro Chemicals, emphasizing that there is no provision for payment of interest on such interest if the interest itself was paid belatedly. The Tribunal's analysis focused on the absence of explicit provisions for interest on interest and the applicability of the Supreme Court's decision to the present case, ultimately leading to the rejection of the appellant's claim for interest on interest. The judgment underscores the importance of statutory provisions and judicial precedents in determining the scope of entitlement to interest on refunds, providing clarity on the legal interpretation of Section 11BB of the Central Excise Act, 1944 in relation to interest on interest claims.