2024 (2) TMI 612 - AT - Central Excise

Refund interest under Section 11BB starts three months after application filing, not from refund order date

M/s. Indian Oil Corporation Ltd. Versus Commissioner of Central Excise, Patna

CESTAT Kolkata held that interest on delayed refund under Section 11BB of Central Excise Act commences from three months after receipt of refund ... Interest on delayed Refund - Interpretation of the term “relevant date,” - Relevant date, whether having a bearing with the date of the order, permitting the refund or the date of filing of the application - HELD THAT:- Section 11 BB, does not talk or uses the phraseology “relevant date,” what it alone speaks is “the date of receipt of application under subsection (1)” of Section 11B. The term relevant date is made use of in Section 11B and that too, in the context of the limitation for making of such an application for filing of a refund claim and provides for a series of situations like export of goods, goods returned for certain specified reasons, etc. or even situations not pertaining directly to manufacturers, provisional payments of duty, judicial ruling and the like. The usage of the term “relevant date” therefore, does not have any impact with reference to the date of proclamation of the admissibility of the refund claim. It is therefore obvious that what clause (ec) of Section 11B refers to, is only to enhance the limitation period, to a case where the duty becomes payable as a result of an order of the court or a direction from the appellate authority - there are no merit in the said interpretation of the learned Commissioner (Appeals). The Hon’ble Gujarat High Court in the case of Kamakshi Tradexim (India) Pvt. Ltd. Vs. Union of India [2017 (4) TMI 223 - GUJARAT HIGH COURT]. clearly held that the liability of the department to pay interest in terms of Section 11BB, of the Central Excise Act commences from date of expiry of three months from the date of receipt of application for refund under Section 11B(i) of the act ibid - It is found that appellant is entitled to payment of interest, three months from the date of the refund application made by them. The appeal filed by the assessee/appellant is allowed, who shall be entitled for payment of interest three months from the date of refund applications - the order of the lower authority is set aside - Appeal allowed. Issues Involved:1. Entitlement to refund claims.2. Entitlement to interest on delayed refunds under Section 11BB of the Central Excise Act, 1944.Summary:Issue 1: Entitlement to Refund ClaimsM/s. IOCL filed appeals challenging the orders of the learned Commissioner (Appeals) which initially rejected their refund claims for Central Excise Duty paid on the export of Naphtha and HSD. The refund claims were initially rejected by the Assistant Commissioner, but on appeal, the Commissioner (Appeals) allowed the refunds, including the cess amount. The refund claims were subsequently sanctioned by the Assistant Commissioner.Issue 2: Entitlement to Interest on Delayed Refunds under Section 11BB of the Central Excise Act, 1944The appellant sought interest for delayed payment of refunds, citing a delay of 1853 days and 1071 days respectively. They relied on the Supreme Court's decision in Ranbaxy Laboratories Ltd. Vs. Union of India, which held that interest under Section 11BB becomes payable from the date of expiry of three months from the date of receipt of the refund application. The Commissioner (Appeals) rejected the claim for interest, interpreting that the relevant date for interest calculation should be the date of the appellate order as per clause (ec) of Section 11B, inserted w.e.f. 11.05.2007.Tribunal's Findings:The Tribunal disagreed with the Commissioner (Appeals), stating that clause (ec) of Section 11B only extends the limitation period for filing a refund claim and does not affect the date from which interest under Section 11BB becomes payable. The Tribunal held that interest is payable from three months after the date of receipt of the refund application, as per the Supreme Court's ruling in Ranbaxy Laboratories Ltd.Conclusion:The Tribunal set aside the order of the lower authority and allowed the appeal, entitling the appellant to interest on the delayed refunds from three months after the date of their refund applications, at the rates prescribed by the government. The appeal was allowed with consequential relief as per law.