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, ...
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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, not from the date of appellate authority's order. Following SC precedents in Ranbaxy Laboratories Ltd. and Manisha Pharmo Plast Private Ltd., the court rejected the respondent's argument that interest should be calculated from the adjudicating authority's order date. The respondents were directed to calculate statutory interest from three months after the application date until actual refund grant and pay within four months.
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.
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