Department must issue deficiency memo within two days of refund application or pay interest under Section 11BB

CESTAT Ahmedabad allowed the appeal by remand regarding interest on delayed refund under Section 11BB of Central Excise Act, 1944. Following SC precedent in Union of India v. Hamdard Laboratories, the tribunal held that the department must issue deficiency memo within two days of receiving refund application, failing which interest becomes payable. The matter was remanded to Commissioner (Appeals) to verify whether proper deficiency memo was issued within stipulated timeframe and decide interest liability accordingly.

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Issues involved:
The issue involved in this case is interest in case of delayed refund as per the provisions of sub Section 11BB of the Central Excise Act, 1944.

Comprehensive details of the judgment:

Issue 1 - Interest on delayed refund:
The Authorized Representative of the appellant argued that there was no delay on their part in filing the refund application. The refund was eventually sanctioned on 31st August, 2015, and the amount was disbursed by 4th September, 2015. The party demanded interest on the refund from 16 March, 2015, to 4th September, 2015, as the refund was not sanctioned within three months.

Issue 2 - Legal precedents:
The Authorized representative relied on the case of RANBAXY LABORATORIES LTD VS. UNION OF INDIA and the decision of the Apex Court in UNION OF INDIA & ORS. Vs. HAMDARD (WAQF) LABORATORIES to support their claim for interest on delayed refund.

Issue 3 - Department's contention:
The Learned AR justified the department's stand by referring to a case involving V.R. OVERSEAS PVT. LTD VS. COMMISSIONER OF CUSTOMS (PORT), where it was held that interest for delay in refund is payable only after all shortcomings pointed out by the department are resolved and payment for refund has been delayed beyond the statutory period.

Issue 4 - Judicial interpretation:
The judgment referred to the decision of UNION OF INDIA & ORS. Vs. HAMDARD (WAQF) LABORATORIES, which emphasized that interest under Section 11BB becomes payable on the expiry of three months from the date of receipt of the refund application, regardless of when the order for refund is made.

Conclusion:
The Court concluded that the department should have initiated communication regarding any deficiencies in the refund claim within two days of receiving the application. Since this was not done in the present case, the appellant's demand for interest on delayed refund was upheld. The matter was remanded to the Commissioner (Appeals) for further consideration in light of the legal precedents cited.

This judgment highlights the importance of timely communication by the department regarding deficiencies in refund claims and the entitlement of parties to interest on delayed refunds as per the provisions of the Central Excise Act, 1944.

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