2026 (2) TMI 179 - AT - Central Excise

Central Excise refund interest on delayed refunds limited to statutory 6% under Section 11BB; higher 12% claim rejected

Refund claims under the Central Excise regime attract statutory refund provisions, with interest governed by the statutory rate under Section 11BB; the ... Refund of duty u/s 11B and interest u/s 11BB - interest on delayed refunds - statutory rate and commencement - characterisation of amounts deposited - refund of duty versus pre-deposit u/s 35F /interest u/s 35FF - precedential scope of Sandvik Asia and subsequent Supreme Court decisions on interest/compensation for delayed refunds - HELD THAT:- The Show Cause Notice was adjudicated by the Commissioner, Customs & Central Excise, Noida vide Order-in-Original No.01/Commissioner/Remission/2013-14 dated 10.07.2013 against the party, confirming the demand of Central Excise Duty of Rs. 40.97.341/- along with interest & the demand of interest on the CENVAT credit of Rs. 41,01,620/-already reversed by the party. It was also held that remission of duty on 'semi-finished goods' is not covered under Rule 21 as duty is chargeable on the 'finished goods' when manufacture is complete and final products are manufactured. Regarding 'finished goods' destroyed in fire, it was held that surveyors report was not provided to substantiate the averment of the party that insurance claim filed by them did not include the element of excise duty on the goods destroyed. All the refunds which are filed under the Central Excise Act, 1944 in terms of the decision of Hon’ble Supreme Court in case of Mafatalal Industries [1996 (12) TMI 50 - SUPREME COURT] and the above provisions whether of the duty, interest or any deposit made are governed by the provision of Section 11B of the Act. The interest thus gets governed by the provisions of Section 11BB as has been held by Hon’ble Supreme Court in case of Ranbaxy Laboratories Ltd. [2011 (10) TMI 16 - SUPREME COURT] There has been exception carved out only for determination of relevant date for determining the period for which interest is to be paid in respect of deposit made as per Section 35F for filing the appeal before an appellate authority. Section 35FF provides that interest would be paid from the date of deposit made under Section 35F. The impugned order exactly holds and allows the interest @ 6% as prescribed by the Notification issued under the provisions of Section 11BB and hence cannot be faulted with. Any claim of interest @ 12% will be contrary to extant provisions of Section 11BB and cannot be allowed. No merits in the appeal. - Appeal is rejected. Issues: Whether the appellant is entitled to interest at the rate of 12% from the date of deposit (or date of reversal) instead of interest at the rate prescribed under Section 11BB of the Central Excise Act, 1944 on the refund of Rs.35,60,087/- ordered by the Appellate Authority.Analysis: The appeal concerns refund of amounts found to be central excise duty following the Tribunal's and appellate orders and the applicability of statutory provisions governing refunds and interest. The Court examined the nature of the amount claimed (refund of duty arising from reversal of CENVAT credit and remission under Rule 21), the scheme of Section 11B and Section 11BB of the Central Excise Act, 1944, and relevant precedents including Mafatlal Industries, Ranbaxy Laboratories, Sandvik Asia, Gujarat Fluoro Chemicals, and subsequent authorities interpreting commencement and rate of interest. The Court distinguished decisions relied upon by the appellant which related to refunds of deposits made during investigations or pre-deposits under Section 35F, noting that Section 35FF governs interest on pre-deposits and prescribes a different starting point. The statutory text, Board circulars and Supreme Court authorities establish that refund of duty under Section 11B attracts interest under Section 11BB, and that the relevant date for commencement of statutory interest is determined by Section 11BB (expiry of three months from receipt of application), with rates fixed by notification. The appellant's reliance on decisions awarding 12% on equitable grounds was found inapplicable where the statutory provision prescribes a specific regime and interest rate; consequently, decisions concerning pre-deposits or inordinate delays beyond the statutory scheme were distinguished.Conclusion: The appellant is not entitled to interest at 12%; the refund and interest are governed by Section 11B and Section 11BB of the Central Excise Act, 1944 and the impugned allowance of interest at the rate prescribed under Section 11BB is correct. The appeal is rejected.