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

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 refund without interest, but the Commissioner (Appeals) ordered interest payment under Section 11BB of the Central Excise Act from the date of tax payment under protest. The Tribunal held that interest should be calculated from three months after the refund application dates, not from the date of tax deposit, as clarified in Ranbaxy Laboratories Ltd. The Revenue was directed to pay the interest within a month from the Tribunal's order receipt.

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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.

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