Court awards 6% interest on delayed refunds under Central Excise Act

M/s. AL TISOURCE BUSINESS SOLUTIONS PVT. LTD. Versus THE DEPUTY COMMISSIONER OF CENTRAL TAX

M/s. AL TISOURCE BUSINESS SOLUTIONS PVT. LTD. Versus THE DEPUTY COMMISSIONER OF CENTRAL TAX - TMI Issues Involved:
1. Entitlement to interest on delayed refunds under Section 11BB of the Central Excise Act, 1944.
2. Legality of the respondent's rejection of the petitioner's claim for interest due to alleged deficiencies in the refund application.

Detailed Analysis:

1. Entitlement to Interest on Delayed Refunds:
The petitioner sought a writ of certiorari to quash the impugned order rejecting the request for interest on delayed refunds amounting to Rs. 11,33,55,127/- under Section 11BB of the Central Excise Act, 1944, read with Section 83 of the Finance Act, 1994. The petitioner argued that the respondent failed to process the refund claims within the prescribed three-month period, thus entitling the petitioner to interest on the delayed refunds. The petitioner cited various judgments from the Apex Court, High Courts, and circulars to support the claim that the three-month period is mandatory and any delay beyond this period automatically entitles the claimant to interest.

2. Legality of the Respondent's Rejection:
The respondent contended that the delay was due to discrepancies and lacunae in the refund applications, which required the petitioner to furnish additional details and documents. The respondent argued that the refunds were sanctioned within three months from the date of final submission of the corrected applications, thus negating any liability to pay interest. The respondent's position was that the prescribed period of three months should start from the date of the final submission, not the initial application.

Court's Findings:
The court examined the relevant judgments and circulars, noting that the issue of interest on delayed refunds is well-settled. The court emphasized that the three-month period prescribed in Section 11BB is mandatory and any delay beyond this period, regardless of whether it is intentional or unintentional, obligates the authority to pay interest. The court referred to several precedents, including the Supreme Court's rulings in Ranbaxy Laboratories Ltd. vs. Union of India and Union of India vs. Hamdard (Waqf) Laboratories, which held that the period for interest calculation starts from the date of the original refund application, not the date of rectification.

The court rejected the respondent's argument that deficiencies in the applications justified the delay. It clarified that deficiencies should be addressed within the prescribed period, and failure to do so does not extend the statutory period. The court highlighted that the respondent's failure to process the refunds within three months constituted a breach of statutory duty, entitling the petitioner to interest.

Conclusion:
The court allowed the petition, setting aside the impugned order and directing the respondent to pay interest at the rate of 6% per annum on the delayed refunds from the date of the original refund application. The respondent was instructed to comply with this order within three months.

Order:
(i) Petition allowed.
(ii) Impugned order dated 11.03.2021/18.03.2021 set aside.
(iii) Respondent directed to pay interest at 6% per annum on delayed refunds within three months from the date of receipt of the court's order.