2023 (12) TMI 251 - HC - Central Excise

Section 11BB interest accrues three months after refund application receipt, not from appellate order date

The HC held that interest under Section 11BB of the Central Excise Act, 1944 accrues from three months after the date of receipt of refund application, ... Relevant date for calculation of interest - interest under Section 11BB of the Central Excise Act, 1944 would accrue from the date of expiry of 3 months from the date of receipt of application for refund or on the expiry of 3 months from the date of communication of the order of the Appellate authority / Court? - HELD THAT:- The issue stands resolved by the judgment of the Hon'ble Supreme Court in RANBAXY LABORATORIES LTD. VERSUS UNION OF INDIA AND ORS. [2011 (10) TMI 16 - SUPREME COURT] wherein after finding that the appellant’s claim for rebate of duty was rejected by the Assistant Commissioner and was subsequently allowed in appeal which was affirmed in further appeal before the Joint Secretary, Government of India it was held Section 11-BB of the Act lays down that in case any duty paid is found refundable and if the duty is not refunded within a period of three months from the date of receipt of the application to be submitted under sub-section (1) of Section 11-B of the Act, then the applicant shall be paid interest at such rate, as may be fixed by the Central Government, on expiry of a period of three months from the date of receipt of the application. It is clear from the extract that the submission of the learned counsel for the respondent on the basis of the Explanation to Section 11BB of the Act to suggest that in view of the deeming contained therein, the interest payable on delayed refund under Section 11BB of the Act would accrue only in the event of delay in making the refund beyond 3 months from the date of the order of the adjudicating authority / appellate authority / Court was rejected by the Hon'ble Supreme Court. The above judgment of the Hon’ble Supreme Court in the case of Ranbaxy has been subsequently followed in the case of Manisha Pharmo Plast Private Ltd., v. Union of India [2020 (11) TMI 726 - SUPREME COURT]. Following the above judgments of the Hon’ble Supreme Court, this Court has no hesitation to hold that interest on refund in terms of Section 11 BB of the Act would accrue in the event of delay in grant of refund beyond 3 months from the date of application i.e., 11.07.2016 in the present case - the respondents are directed to calculate the statutory interest in terms of Section 11 BB of the Act i.e., 3 months from 11.07.2016 (date of application for refund) until 17.12.2019 when the rebate was actually granted and pay the same within 4 months from the date of receipt of a copy of this order. Petition disposed off. Issues Involved:1. Whether interest under Section 11BB of the Central Excise Act, 1944 accrues from the date of expiry of 3 months from the date of receipt of the application for refund or from the date of the order of the Appellate authority/Court.Summary:Issue 1: Accrual of Interest under Section 11BB of the Central Excise Act, 1944- The petitioner, a subsidiary of M/s. Herrenknecht AG, Germany, engaged in the manufacture and export of Tunnel Boring Machines (TBM), claimed a rebate of Rs. 2,99,45,260/- for a refurbished TBM exported to Germany. The rebate claim filed on 07.07.2016 was initially rejected on 10.10.2016 on the grounds that the process did not amount to manufacture.- The petitioner's appeal was also rejected on 31.10.2017. However, an order dated 11.05.2017 by the Principal Commissioner of Central Excise held that the process did amount to manufacture. This led to a direction from the High Court to reconsider the appeal in light of the 11.05.2017 order.- The Commissioner Appeals remitted the matter back to the Adjudicating Authority, which sanctioned the rebate on 09.12.2019. The petitioner then claimed interest from 11.10.2016 to 17.12.2019.- The impugned order rejected the interest claim, stating that the rebate claim was sanctioned within three months from the date of the order by the adjudicating authority, and thus, no delay occurred.- The petitioner argued that the impugned order contradicts the Supreme Court judgment in Ranbaxy Laboratories Ltd. v. Union of India, which held that interest under Section 11BB accrues if the refund is delayed beyond three months from the date of application.- The respondent contended that interest accrues only if the refund is delayed beyond three months from the date of the adjudicating authority's order, relying on the Explanation to Section 11BB of the Act.Court's Findings:- The Court referenced the Supreme Court judgment in Ranbaxy Laboratories Ltd. v. Union of India, which clarified that interest under Section 11BB accrues from three months after the date of the refund application, not from the date of the adjudicating authority's order.- The Court also cited a circular from the Central Board of Excise and Customs emphasizing that interest is automatically applicable for refunds sanctioned beyond three months from the application date.- The Court concluded that the petitioner is entitled to interest from three months after the application date (11.07.2016) until the rebate was granted (17.12.2019).Order:- The respondents are directed to calculate and pay the statutory interest as per Section 11BB of the Act from 11.07.2016 to 17.12.2019 within four months from the date of receipt of this order.- The writ petition is disposed of accordingly, with no costs.