2024 (8) TMI 1105 - AT - Service Tax

Exporters entitled to interest under section 11BB on delayed refunds of unutilized cenvat credit under Rule 5

CESTAT Mumbai held that interest under section 11BB of Central Excise Act is payable on delayed refunds of unutilized cenvat credit under Rule 5 of Cenvat ... Denial of interest claimed u/s. 11BB of the Central Excise Act, on delayed refunds sanctioned under Rule - 5 of the Cenvat Credit Rules, 2004 - HELD THAT:- Consistent decisions are available on the issue of payment of interest on delayed refund of unutilized credit since provision of the Law, supported by judgments of Hon’ble Gujarat High Court in COMMISSIONER OF CENTRAL EXCISE VERSUS RELIANCE INDUSTRIES LTD. [2010 (10) TMI 190 - GUJARAT HIGH COURT] was pronounced favouring such interest payment except the one passed in Gionee India Pvt. Ltd. case, in which its inadmissibility is distinguishable and could never be taken as binding precedent for not having considered the settled position of law in this case, apart from the fact that provision under Rule 11B covers refund of accumulated cenvat credit that is payable on export under Rule-5 of Cenvat Credit Rules, which is put in the category of refund of duty and section 11BB grants interest to such refund sanctioned three months beyond receipt of the refund application, which is consistently held to be counted from the date of filing of first refund application. The appellant is entitled to get interest on refund sanctioned to it from three months after expiry of the date of filing of its first refund application for respective appeals - appeal allowed. Issues:Denial of interest claimed under section 11BB of the Central Excise Act for delayed refunds sanctioned under Rule 5 of the Cenvat Credit Rules, 2004.Analysis:The appeal challenged the denial of interest on delayed refunds under Rule 5 of the Cenvat Credit Rules by the Commissioner (Appeals). The Appellant, providing services classified as export under Rule-6A of the Service Tax Rules, sought refunds for two quarters in 2013 and four quarters in 2014-2015. Despite succeeding in obtaining a favorable decision on the refund claim, interest under section 11BB was denied by the Commissioner (Appeals). The Appellant argued that such refunds should attract interest based on judicial precedents and the provisions of the Central Excise Act.The Appellant's counsel cited various decisions, including those by the Hon'ble Gujarat High Court and the Supreme Court, to support the claim for interest on delayed refunds. The counsel emphasized that Cenvat Credit falls under Excise Duty/Service Tax, and Rule 5 expressly refers to it in relation to section 11BB of the Act. The Appellant contended that the denial of interest was based on an erroneous finding and that the Tribunal should consider the settled legal position favoring interest payment on delayed refunds.The Authorized Representative objected to the grounds of appeal and supported the Tribunal's order. However, the Tribunal, after reviewing relevant laws, case laws, and the case record, concluded that interest on delayed refunds of unutilized credit is consistent with legal provisions and judicial precedents. The Tribunal highlighted the mandatory nature of interest payment under section 11BB and referenced the Hon'ble Gujarat High Court's decision supporting such interest payment.The Tribunal emphasized that the denial of interest was not in line with established legal principles and that the Appellant was entitled to interest on the refunded amount from three months after the filing of the first refund application. The Tribunal allowed the appeals, modifying the orders of the Commissioner of Central Tax to include interest under section 11BB, directing the respondent Department to pay the interest within two months of the order.In conclusion, the Tribunal's decision was based on the consistent legal position favoring interest payment on delayed refunds under Rule 5 of the Cenvat Credit Rules, in accordance with section 11BB of the Central Excise Act. The judgment upheld the Appellant's entitlement to interest on the refunded amount, aligning with established legal principles and judicial precedents.