2023 (5) TMI 293 - AT - Central Excise

Supreme Court: No excise duty on intermediate products, interest due on refund, Ranbaxy precedent

Commissioner of CGST, Mumbai East Versus M/s. Hindustan Composite P. Ltd.

The Supreme Court ruled that excise duty is not payable on intermediate products, leading to a refund claim by the respondent. The High Court directed the ... Time Limitation for payment of Interest - whether the interest needs to be paid after three months from the date of filing the refund application or from the date of deposit of duty? - Section 11BB of the Central Excise Act - HELD THAT:- From the plain reading of the above section it is evident that the interest in case of delayed refund is payable only for the period of delay beyond three months from the date of filing the application. Hon’ble Supreme Court has in the case of RANBAXY LABORATORIES LTD. VERSUS UNION OF INDIA AND ORS. [2011 (10) TMI 16 - SUPREME COURT] has held that the liability of the revenue to pay interest under Section 11BB of the Act commences from the date of expiry of three months from the date of receipt of application for refund under Section 11B(1) of the Act and not on the expiry of the said period from the date on which order of refund is made. Reliance also placed upon the decision in the case of SANDVIK ASIA LIMITED VERSUS COMMISSIONER OF INCOME-TAX AND OTHERS [2006 (1) TMI 55 - SUPREME COURT]. On going through the judgment we find that the issue under consideration before the Hon’ble Apex Court as per para 16 was in respect of interpretation of Sections 237, 240, 243 and 244 of the Income Tax Act, 1961 - On perusal of the said sections and section 11BB of Central Excise Act, we do not find that these sections are in pari materia. Accordingly the reliance placed by the counsel on the above referred decision of Hon’ble Supreme Court would not be proper. There are merits in the appeal of the Revenue. The interest under Section 11BB of the Central Excise Act is required to be paid to the respondent for any delay beyond three months from the date of filing the refund claims viz. 23.06.1997 and 03.07.1997 - appeal allowed. Issues Involved:1. Entitlement to interest on delayed refund.2. Commencement date for calculation of interest on refund.Summary:Entitlement to Interest on Delayed Refund:The respondent paid central excise duty on an intermediate product under protest from August 1979 to March 1987. The Supreme Court, in Hindustan Ferrodo Ltd., ruled that excise duty is not payable on intermediate products as they are not marketable. Consequently, the respondent filed refund applications in June and July 1997, which were initially rejected due to failure to produce duty-paying documents. The Tribunal later allowed the refund along with interest. However, the refund was again denied on grounds of unjust enrichment. The High Court directed the refund, which was sanctioned without interest. The Commissioner (Appeals) then directed payment of interest under Section 11BB of the Central Excise Act from the date of tax payment under protest.Commencement Date for Calculation of Interest on Refund:The Revenue contended that interest should be paid only after three months from the date of filing the refund application, not from the date of deposit of duty. The Tribunal reviewed Section 11BB of the Central Excise Act, which states that interest on delayed refunds is payable from three months after the date of receipt of the refund application. The Supreme Court in Ranbaxy Laboratories Ltd. clarified that interest under Section 11BB becomes payable after three months from the date of receipt of the refund application, not from the date of the refund order.Conclusion:The Tribunal found merit in the Revenue's appeal, ruling that interest under Section 11BB should be calculated from three months after the refund application dates (23.06.1997 and 03.07.1997), not from the date of tax deposit. The order of the Commissioner (Appeals) was set aside, and the Revenue was directed to pay the interest within a month from the date of receipt of the Tribunal's order. The appeal was allowed accordingly.