Interest on Delayed Refund Starts 3 Months After Application, Not Tribunal Order, Under Section 11BB

The Tribunal ruled in favor of the appellant, determining that interest on the delayed refund should be calculated from three months after the date of the original refund application, not from the date of the Tribunal's order. This decision was based on Section 11BB of the Central Excise Act and supported by the Supreme Court's judgment in Ranbaxy Laboratories Ltd. vs. Union of India. The Tribunal set aside the impugned orders, allowing the appellant's appeals and entitling them to the interest claimed.

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Issues Involved:
1. Whether interest on delayed refund is payable after three months from the date of filing of refund application in terms of Section 11BB of the Central Excise Act, 1944, or from the date of the order of the Tribunal allowing the refund claim.

Summary:

Issue 1: Interest on Delayed Refund

1. Facts of the Case:
- The appellant, engaged in manufacturing pharmaceutical products and providing Business Auxiliary Services, formed a partnership firm and paid service tax on remuneration received from the firm under a mistaken belief.
- The appellant also paid service tax on royalty received under a Trade Mark License Agreement with the firm, believing it was classifiable under Intellectual Property Service.
- Upon realizing the error, the appellant filed several refund claims for the erroneously paid service tax.

2. Procedural History:
- Various Show Cause Notices (SCNs) were issued, proposing to reject the refund claims.
- Orders-in-Original confirmed the proposals, and the appellant's appeals to the Commissioner (Appeals) were dismissed.
- The Tribunal, in a Final Order dated 27.04.2021, held the appellant was not liable to pay service tax, and the service tax paid was refundable.
- The High Court of Gujarat dismissed the Revenue Department's appeals against this order.
- The appellant filed for the release of the refund, which was sanctioned by the Assistant Commissioner, who calculated interest from the date of the refund application received on 05.04.2022.

3. Appellant's Argument:
- The appellant argued that interest should be calculated from the expiry of three months from the date of the original refund application, citing the Supreme Court judgment in Ranbaxy Laboratories Ltd. vs. Union of India.
- The appellant contended that the relevant date for interest calculation should be from the date of the original refund application and not from the date of the Tribunal's order.

4. Respondent's Argument:
- The respondent argued that the refund was crystallized only after the Tribunal's order dated 27.04.2021, and the date of the refund application should be considered as 04.04.2022.

5. Tribunal's Analysis:
- The Tribunal referred to Section 11BB of the Central Excise Act, which states that interest on delayed refunds is payable after three months from the date of receipt of the refund application.
- The Tribunal noted that the appellant's refund application dates back to the original filing and not the subsequent request for release.
- The Tribunal cited the Supreme Court's judgment in Ranbaxy Laboratories Ltd. and other relevant case laws, affirming that interest is payable from three months after the date of the original refund application.

6. Conclusion:
- The Tribunal concluded that the appellant is entitled to interest from three months after the date of the original refund application.
- The impugned orders were set aside, and the appeals were allowed in favor of the appellant.

Pronounced in the open court on 18.10.2023.

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