Court orders interest calculation under Section 11BB of Central Excise Act from refund application date

The High Court directed respondent No.3 to calculate interest on a refunded amount under Section 11BB of the Central Excise Act, 1944, from the date of expiry of three months from the refund application date. The court clarified that interest is payable if duty is not refunded within three months of the refund application. The Supreme Court emphasized that interest under Section 11BB starts accruing from the expiry of the three-month period, not from the refund order date. Both writ applications were allowed, and respondent No.3 was instructed to calculate interest as per the court's directive.

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Issues Involved:
1. Entitlement to interest on refunded amount under Section 11BB of the Central Excise Act, 1944.

Detailed Analysis:

Entitlement to Interest on Refunded Amount under Section 11BB of the Central Excise Act, 1944:

By this writ application under Article 226 of the Constitution of India, the writ applicant has prayed for the issuance of a writ of Certiorari or Mandamus to sanction interest under Section 11BB of the Central Excise Act, 1944 on the refund sanctioned under Section 11B of the Central Excise Act, 1944.

The writ applicant, a private limited company engaged in the manufacture and export of hand tools, challenged the order-in-original dated 17.11.2021 passed by the respondent No.3. Although the refund of Rs. 39,94,222/- was sanctioned under Section 11B of the Act, 1944, the interest in terms of Section 11BB of the Act, 1944 was declined.

In the order dated 01.07.2021, the High Court of Gujarat had previously set aside the impugned orders, allowing the petitioners' rebate claims. The Court noted that the conditions prescribed in paragraph 4(c) of the notification dated 06.09.2004 were not applicable as the material or partially processed goods were not moved outside the factory.

The Supreme Court in the case of Ranbaxy Laboratories Ltd. vs. Union of India, reported in 2011 (273) ELT 3 (SC), clarified that Section 11BB of the Act comes into play only after an order for refund has been made under Section 11B of the Act. Interest under Section 11BB becomes payable if the duty is not refunded within three months from the date of receipt of the application for refund under Section 11B(1) of the Act. The Explanation to Section 11BB deems that an order made by an Appellate Authority or the Court is considered an order under sub-section (2) of Section 11B of the Act, but it does not affect the date from which interest becomes payable.

The Supreme Court concluded that the liability to pay interest under Section 11BB commences from the date of expiry of three months from the date of receipt of the application for refund under Section 11B(1) of the Act and not from the date on which the order of refund is made.

In view of this, the High Court directed the respondent No.3 to calculate the interest from the date of expiry of three months from the date of receipt of the refund application, as detailed in the provided charts. The exercise is to be completed within eight weeks from the receipt of the order.

Both writ applications were allowed, and the respondent No.3 was directed to undertake the calculation of interest accordingly.

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