Court grants interest on refund claim under Central Excise Act

The Court allowed the appellant's appeal against the denial of interest on a refund claim under Section 35FF of the Central Excise Act, 1944. The Court held that the appellant was entitled to interest at the rate of 12% per annum for the period after three months until the refund was granted. The appeal was allowed accordingly.

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Issues involved: Appeal against the rejection of refund claim under Section 35FF of the Central Excise Act, 1944 on the ground of limitation and denial of interest on the refund claim.

The appellant, a company engaged in the manufacture of footwear, challenged the rejection of its refund claim by the Commissioner Central Excise. The Tribunal had earlier set aside the demand made by the authority and directed the appellant to make a pre-deposit under Section 35F of the Act. The Tribunal allowed the appeal and set aside the demand, leading to the appellant filing a refund claim. The Commissioner rejected the refund claim on the basis of being filed after the expiry of one year from the Tribunal's order. The appellant appealed against this decision, which was dismissed by the Commissioner (Appeals) on the ground of limitation under Section 11B of the Central Excise Act, 1944. The Tribunal allowed the appeal to the extent of refund of the pre-deposit, but denied interest on the claim, citing a previous decision and the issuance of a show cause notice within three months of the refund claim. The appellant challenged this denial of interest in the present appeal.

The appellant argued that the Tribunal's reliance on a specific case was not applicable to the present situation and referred to various judgments, including a circular simplifying refund procedures. The respondent contended that the Tribunal's decision was appropriate based on the previous case law. The Court considered the facts and arguments presented by both parties.

The Court analyzed the previous case cited by the Tribunal, which involved the denial of interest on a refund claim made within three months of becoming due. In the present case, the pre-deposit was made in 1998 and the refund claim was filed in 2011, with the Tribunal's order allowing the refund in 2010. The Court discussed the entitlement to interest on delayed refund payments and referred to previous judgments highlighting the obligation to pay interest after three months from the due date of the refund. The Court also referenced a government circular clarifying refund procedures.

In conclusion, the Court held that the appellant was entitled to interest at the rate of 12% per annum for the period after three months until the refund was granted. The appeal was allowed accordingly.

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