Interest on delayed refund under Section 11BB payable after three months from filing claim, not sanction date

CESTAT Bangalore held that interest on delayed refund under Section 11BB of Central Excise Act, 1944 becomes payable after expiry of three months from filing of refund claim, not from sanction date. Following SC precedent in Ranbaxy Laboratories Ltd. v. Union of India, tribunal ruled that interest calculation commences three months post-application filing regardless of refund sanction timing. Appeal partly allowed, directing payment of interest amount Rs.11,83,454/- to appellant. Impugned order set aside.

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Issues:
- Denial of interest on delayed refund claim

Analysis:

The appeal was directed against the Order-in-Appeal passed by the Commissioner of Central Tax(Appeals), Bangalore. The appellant initially filed a cash refund claim of accumulated cenvat credit under Rule 5 of the CENVAT Credit Rules, 2004. The claims were rejected by the adjudicating authority on the grounds that clearances were made to 100% EOU, deeming cash refund inadmissible under Rule 5. The appellant appealed, and the Commissioner(Appeals) partially allowed the appeal, directing that cash refund of accumulated cenvat credit on account of deemed export was admissible till a certain date, remanding the matter for further consideration. The appellant claimed a specific refund amount, which was partially sanctioned by the adjudicating authority, with the remaining amount rejected. The appellant then sought interest on the calculated refund amount under Section 11BB of the Central Excise Act, 1944, for delayed refund. The Commissioner(Appeals) upheld the adjudicating authority's decision on both issues, leading to the present appeal.

The appellant argued that interest on the delayed refund was warranted under Section 11BB, citing relevant judgments by the Hon'ble Supreme Court. The Revenue, represented by the learned AR, supported the Commissioner(Appeals)' findings, stating that the refund was quantified and paid after de novo proceedings, negating the need for interest payment. The Tribunal, after hearing both sides and reviewing the records, focused on whether the appellant was entitled to the interest claim. Citing the Supreme Court's interpretation of Section 11BB in previous cases, the Tribunal emphasized that interest becomes payable if the claimed amount is not refunded within three months from the date of the refund application, irrespective of the finality of the refund claim. Applying the Court's principles, the Tribunal concluded that the interest amount claimed by the appellant was admissible. Consequently, the impugned order was set aside, and the appeal was partly allowed, granting the interest claim to the appellant.

In conclusion, the Tribunal's decision highlighted the importance of timely interest payment on delayed refund claims under Section 11BB, emphasizing the date of the refund claim filing as the relevant starting point for calculating interest, as per established legal precedents.

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