2020 (11) TMI 726 - SC - Central Excise

Supreme Court Grants Statutory Interest on Belated Refund Application

MANISHA PHARMO PLAST PVT. LTD. Versus UNION OF INDIA

The Supreme Court addressed the denial of relief of statutory interest under Section 11BB of the Central Excise Act, 1944. The Court held that the ... Interest on refund claim - Section 11BB of the Central Excise Act, 1944 - interest denied on the finding that the adjudication of the claim attained finality only after dismissal of the proceedings before the High Court on 18-7-2005; whereas the Department had already paid refund amount to the appellant on 26-6-2005 - Circular No. 670/61/2002-CX.8, dated 1-10-2002 - HELD THAT:- The approval of the dictum of the Rajasthan High Court in JK. CEMENT WORKS VERSUS ASSTT. COMMISSIONER OF CENTRAL EXCISE & CUSTOMS [2004 (2) TMI 78 - RAJASTHAN HIGH COURT], which directly deals with the claim of the appellant before this Court who had made application for refund on 30-12-1999 and, therefore, the statutory interest ought to commence after non-payment within three months from the date of application, being the starting point envisaged by Section 11BB of the Act. The claim of the appellant regarding statutory interest under Section 11BB of the Act is allowed - appeal allowed - decided in favor of appellant. Issues involved:- Denial of relief of statutory interest under Section 11BB of the Central Excise Act, 1944.- Interpretation of relevant legal provisions and precedents regarding the starting point of liability to pay interest on belated refund.Analysis:The Supreme Court addressed the issue of denial of relief of statutory interest under Section 11BB of the Central Excise Act, 1944 in a case where the appellant had filed an application for refund on 30-12-1999. The High Court had denied the relief of interest, stating that the adjudication of the claim attained finality only after dismissal of proceedings before the High Court on 18-7-2005, even though the Department had already paid the refund amount to the appellant on 26-6-2005. The Court referred to the exposition in a previous case, Ranbaxy Laboratories Ltd. v. Union of India, emphasizing that the relevant date for determining the liability to pay interest is the date of application laying claim to refund. The Court highlighted a specific paragraph from the Ranbaxy case which elucidated the starting point for the liability to pay interest, emphasizing that non-payment within three months from the date of application triggers the liability to pay interest, irrespective of the final decision on the refund claim.The Court further endorsed the dictum of the Rajasthan High Court, which directly pertained to the appellant's claim for refund. Given that the appellant had applied for refund on 30-12-1999, the Court held that the statutory interest should commence after non-payment within three months from the date of application, in accordance with Section 11BB of the Act. The Court reaffirmed its stance taken in the Ranbaxy case and found no reason to deviate from it. Consequently, the Court allowed the appeal, granting the appellant's claim for statutory interest under Section 11BB of the Act. The Court directed the calculation and expeditious payment of the amount, ensuring that it is paid within three months from the date of the judgment. The High Court's judgment denying the relief of interest was set aside, and the appeal was allowed without any order as to costs.