2025 (11) TMI 1097 - HC - Central Excise

Refund of unutilized CENVAT credit under Rule 5, CENVAT Credit Rules 2004, with interest; pay within two months

Goldman Sachs Services Private Limited Versus Union of India, Principal Commissioner of Central Tax, Bengaluru, Deputy Commissioner of Central Tax, Bengaluru.

Petitioner entitled to refund of unutilized CENVAT credit under Rule 5, CENVAT Credit Rules, 2004, and to interest on the delayed refund; HC found ... Seeking refund of unutilized CENVAT credit in terms of Rule 5 of CENVAT Credit Rules, 2004 - entitlement to interest on delayed refund - HELD THAT:- In the instant case, the respondents having not considered the claim of the petitioner for interest on delayed refund and in the light of the principles laid down in the aforeextracted judgment of this Court, the present petition deserves to be disposed off, directing the concerned respondent to grant interest on the delayed refund as sought for at Annexures ‘B’ and ‘C’, within a stipulated time frame. The respondents are directed to grant / pay interest on delayed refund to the petitioner as sought for in Annexures ‘B’ and ‘C’, dated 05.12.2024 and 17.01.2025 respectively, after due verification as expeditiously as possible and at any rate within a period of two months from the date of receipt of a copy of this order. Petition allowed. ISSUES PRESENTED AND CONSIDERED 1. Whether a successful applicant for refund of unutilized CENVAT credit under Rule 5 of the CENVAT Credit Rules, 2004 is entitled to interest on delayed refund in terms of Section 11BB of the Central Excise Act, 1944 read with Section 83 of the Finance Act, 1994. 2. Whether entitlement to interest under Section 11BB accrues automatically after expiry of 90 days from filing of the refund application, or requires a separate fresh application for interest by the claimant. 3. Whether the revenue is obliged to calculate and disburse interest once the refund claim has attained finality, and what procedural role verification by the revenue may play before disbursement. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Entitlement to interest on delayed refund under Section 11BB: Legal framework: Section 11BB of the Central Excise Act provides for interest on delayed refunds where refund is not made within 90 days of the receipt of the application. Rule 5, CENVAT Credit Rules, 2004 governs refund of unutilized CENVAT credit. Precedent treatment: The Court relied upon and followed prior High Court decisions recognizing entitlement to interest where refund orders have been passed in favour of the claimant and the statutory 90-day period has been exceeded. Interpretation and reasoning: Where a refund claim under Rule 5 has been finally allowed and refund sanctioned, the statutory mechanism in Section 11BB mandates payment of interest for delay beyond 90 days. The Court examined the refund orders on record and concluded that, having been sanctioned and attained finality, the claimants are entitled to interest as a legal consequence of delayed payment. Ratio vs. Obiter: Ratio - Final sanction of refund combined with delay beyond 90 days gives rise to a right to interest under Section 11BB. Obiter - No expansive departure from the statutory text beyond applying established principles. Conclusions: The petitioner is entitled to interest on delayed refunds in accordance with Section 11BB once the refund claims have been finally allowed. Issue 2 - Automatic accrual of interest vs. requirement of separate application: Legal framework: Section 11BB prescribes interest on delayed refunds after 90 days; statutory language contemplates accrual upon delay rather than conditioning entitlement on a fresh application. Precedent treatment: The Court followed prior rulings holding that interest accrues by operation of statute upon expiry of the prescribed period and does not depend on a separate, substantive application for interest where the refund claim itself has been allowed. Interpretation and reasoning: The judgment treats interest as a legal incident of delayed refund - automatic in principle - but recognises administrative practice may require submission of particulars to enable computation. The Court therefore ordered payment without insisting on a new substantive claim, while permitting the revenue a limited role to verify calculations. Ratio vs. Obiter: Ratio - Interest under Section 11BB accrues automatically after the 90-day period and is payable once the refund claim is finally allowed; Obiter - administrative modes (e.g., filing of ancillary applications) do not affect the statutory entitlement. Conclusions: Entitlement to interest accrues automatically; the absence of a separate application for interest does not defeat the statutory right once the refund has been sanctioned. Issue 3 - Obligation of revenue to calculate and disburse interest and permissible verification: Legal framework: Statutory entitlement to interest is subject to computation of quantum and dates; administrative functionaries are charged with effecting payment after verification of amounts. Precedent treatment: The Court applied prior decisions directing revenue to grant interest after making due verification of the claimed quantum and period of delay. Interpretation and reasoning: While the right to interest is statutory and automatic, the Court recognised a limited, reasonable verification role for the revenue to confirm calculations and ensure payments accord with the law. The verification is procedural, not a re-examination of the merits of the refund claim which has attained finality. The Court therefore directed the revenue to make payment after due verification within a specified, short time frame (two months) to prevent protracted delay. Ratio vs. Obiter: Ratio - Revenue must disburse interest upon finalisation of refund and may only carry out limited verification of calculations; prolonged or substantive re-examination is impermissible. Obiter - Specification of a two-month timeline is a remedial direction tailored to the facts. Conclusions: The respondents are directed to verify the calculation of interest and disburse the applicable interest on delayed refunds expeditiously (ordered within two months), without reopening the adjudicated refund orders. Cross-references and Consolidated Outcome The Court applied the foregoing principles together: where refund claims under Rule 5 have been finally allowed and refund payments delayed beyond 90 days, interest under Section 11BB accrues automatically; the revenue must effect payment of such interest after limited verification of the quantum and period claimed, and within a stipulated short timeframe to avoid further prejudice to the claimant. The directive to verify does not permit relitigation of the merits of already finally allowed refund orders.