TaxTMI 
TaxTMI 
2023 (7) TMI 715
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....ct, the moving of an application is a prerequisite for computation of the date from which interest would be payable on a refund. It is this principal question which falls for determination. 3. For the sake of brevity, the Court deems it apposite to notice the facts as they obtain in the writ petition filed by M/s Goldy Engineering Works vs. Commissioner of Central Excise & Anr. W.P.(C) 4332/2022 On 27 July 2006, a Show Cause Notice [SCN] is stated to have been issued to the petitioner, its proprietor, one M/S Aay Kay Engineering Works and its proprietor, in respect of certain goods which had been seized. The aforesaid SCN was followed by another SCN dated 29 January 2007 in terms of which the Department raised a demand for additional duty as well as proposing penal action again against the noticees for having violated the provisions of an exemption notification. The petitioner asserts that during the pendency of those proceedings, it was also forced to deposit an amount of Rs. 20,00,000. The SCNs were ultimately finalized in terms of the order in original dated 08 February 2008. 4. In terms of the aforesaid order, the Additional Commissioner confirmed the duty demand of Rs. 4....
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....assailed by the petitioner, it is not open to it to now claim any further interest on the same. In fact, the respondents aver that the said position was also communicated to the petitioner clearly in terms of its letters dated 31 July 2018 and 13 November 2018. 9. Addressing submissions on behalf of the petitioner, Mr. Mishra would contend that the stand as taken by respondents is wholly arbitrary since once the order in original had come to be set aside in appeal, they were obliged to refund the amounts that had been collected from the petitioner during the course of investigation and the proceedings which were initiated. It was his submission that the obligation of the respondents to effect that refund could not be hinged or made dependent upon an application being made by the petitioner and since such action was merely consequential, it should have been initiated by the respondents of their own volition. Mr. Mishra submitted that the retention of refund by the respondents despite the orders passed in appeal clearly amounts to unjust enrichment and the Court consequently must hold the respondent liable to pay interest for the period by which the actual refund was delayed. 1....
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....liance on the decision of Apex Court in the case of Sandvik Asia Ltd. v. Commissioner of Income Tax-I, Pune reported in 2006 (196) E.L.T. 257. 16. To our mind, the Deputy Commissioner committed a serious error in making above observations. Firstly, the petitioners had lodged their refund claims at the relevant time itself way back in the year 1991 when the question of classification was decided in their favour by the Commissioner. Secondly, the Department did not release the refund for a considerable period of time since such order of the Commissioner (Appeals) was challenged before the Tribunal. Thirdly, the Commissioner (Appeals) disposed of the petitioners' case on 11-10-2002 with respect to the refund and not with respect to the original claim of classification. Fourthly, the application filed by the petitioners on 10-1-2003 was a fresh application for refund and cannot be treated as the original application when the refund applications were already filed at the relevant time. Fifthly, the Tribunal in case of Bharat Heavy Electricals Ltd. did not hold that the interest would be available only after three months of the date of the appellate order. In the said case, ....
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....delayed refunds of such duty. The instructions contained in paragraphs 2 and 3 above will apply mutatis mutandis in respect of case under the CESA and may be followed in the manner indicated above. The above circular was referred to and relied upon by the Division Bench of this court in case of Afrique Tradelinks Pvt. Ltd. (supra). The Bench held as under:- "11. In the facts of the instant case, while the Deputy Commissioner had determined the refund amount of Rs. 14,83,303/-, the appellate authority allowed the additional refund amount of Rs. 5,21,099/- and, therefore, there is no justification for denying the petitioners interest for the delay in payment of the said amount of Rs. 5,21,099/- for the period from the date of expiry of three months from 31.10.1995 when the petitioners had made the application for refund of the entire amount of Rs. 20,72,023/- out of which Rs. 14,83,303/- was directed to be refunded by the Deputy Commissioner's order dated 6.6.2000 and the balance amount of Rs. 5,21,099/- was ordered to be refunded by the Appellate Commissioner's order dated 26.2.2001." As pointed out by the learned counsel for the petitioners, in ca....
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....thereafter, unjustly withheld the interest payable thereon. At all stages, the petitioners had to approach higher authorities in further appeals. Though the Commissioner (Appeals) had specifically provided that the refund shall be granted alongwith interest under section 11BB if payable, the same was not realised on the ground that the interest would be payable only after the date of appellate order and that the refund application was filed after the date of the appellate order completely ignoring the fact that refund claims were filed much earlier and also ignoring the instructions of the CBEC issued in exercise of powers under section 37B of the Act. 22. In sum and substance, in the facts of the present case, the Department cannot avoid the liability of accounting for interest on the delayed payment of interest to the extent the same was paid late. Since such claim does not fall within the statutory provisions contained in section 11BB of the Act, in exercise of writ jurisdiction, we would not direct payment of such interest at the statutory rate but would provide for reasonable interest looking to the present trend. Under the circumstances, the petition is allowed. The ....
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....." 12. Mr. Mishra also sought to draw sustenance from the judgment rendered by a Division Bench of our Court in Team HR Services Pvt. Ltd. vs. Union of India 2020 SCC OnLine Del 2602 and referred to the following observations appearing therein in order to buttress the submissions that were advanced: - "10. We have yet further enquired from the Counsel for the respondents, whether not the respondents, inspite of being State within the meaning of Article 12 of the Constitution of India and expected to not act to the prejudice of its citizens, are acting as "finders keepers", by inspite of having been held to be not entitled in law to the entire amount of Rs. 4, 66, 39, 061/-, refusing to refund what has already been received and to which they have not been held to be entitled. xxx xxx xxx 12. The respondents are reminded of Article 265 of the Constitution of India prohibiting any tax to be levied or collected except by authority of law. The respondents have also not pleaded a case of the petitioner being not entitled to refund, on the ground of the petitioner having passed of the liability to another as illustrated in the Nine Judge Bench's judgment ....
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....ction for the reason of any statutory remedy being available to the petitioner. When it is so and when the reasons disclosed in the order refusing refund are found to be illogical and de hors the statutory provision and further when it is found that the respondents State are illegally withholding money, a case for issuing a mandamus as sought is made out. xxx xxx xxx 20. In the present case, as aforesaid, the amount of Rs. 2, 38, 00, 000/- was deposited by the petitioner of its own volition, during the audit/investigation, though under protest and the petitioner has not chosen to detail the circumstances in which the petitioner felt compelled to make the deposit. The petitioner for the first time sought refund of the said amount vide letter dated 2nd May, 2018. 21. Considering the said facts, we do not find the petitioner entitled to interest at any higher rate than @ 6% per annum from the date of deposit i. e. 27th October, 2006 till the end of May, 2018 i.e. 31st May, 2018. However, we do not find any justification for the respondents retaining the said amount thereafter and find the respondents liable for interest with effect from 1st June, 2018 onward....
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.... The Hon'ble Supreme Court vide its order dated 26.11.2001 dismissed the appeal. Even though the Apex Court did not spell out the reasons for dismissal, it can well be construed in the light of its earlier judgment in the case of Suvidhe Ltd. and Mahavir Aluminium that the law relating to refund of pre-deposit has become final. 3. In order to attain uniformity and to regulate such refunds it is clarified that refund applications under Section 11B(1) of the Central Excise Act, 1944 or under Section 27(1) of the Customs Act, 1962 need not be insisted upon. A simple letter from the person who has made such deposit, requesting the return of the amount, along with an attested Xerox copy of the order-in-appeal or CEGAT order consequent to which the deposit made becomes returnable and an attested Xerox copy of the Challan in Form TR6 evidencing the payment of the amount of such deposit, addressed to the concerned Assistant/Deputy Commissioner of Central Excise or Customs, as the case may be, will suffice for the purpose. All pending refund applications already made under the relevant provisions of the Indirect Tax Enactments for return of such deposits and which are pen....
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....vant date. The relevant date, according to Ms. Narain, has to be understood bearing in mind the provisions made in Section 11B(5)(B)(ec) of the 1944 Act and thus be liable to be understood, in light of the facts of the present writ petitions, as the date when the Appellate Authority proceeded to set aside the order in original. 17. It was further submitted by Ms. Narain that in terms of Section 11BB, interest is liable to be paid only if the refund is not affected within a period of three months from the date of receipt of an application made in accordance with Section 11B(1). According to learned counsel, undisputedly, the petitioner made that application for the first time on 14 November 2016 and the refund was granted on 01 March 2017. In view of the aforesaid, it was Ms. Narain's submission that refund if at all would be liable to be paid only if the date of 01 March 2017 be recognised to fall beyond the three month window as contemplated under Section 11BB when computed from 14 November 2016. The submission in essence was that the liability to pay interest on a refund would arise only if the same be effected three months after the making of an application for the same by th....
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....e implied and there is no room for any intendment. (See Cape Brandy Syndicate v. IRC [(1921) 1 KB 64] and Ajmera Housing Corpn. v. CIT [(2010) 8 SCC 739]" 19. Ms. Narain also drew our attention to the judgment of the Supreme Court in Union of India and Ors. vs. Hamdard (Waqf) Laboratories (2016) 6 SCC 621 where the issue of the interpretation to be accorded on Section 11B arose for consideration yet again. In Hamdard, the Supreme Court while reiterating the principles set out in Ranbaxy Laboratories held as follows: - "18. The seminal issue is whether there has been delay in grant of refund and consequently, whether the respondent assessee is entitled to interest. 19. Keeping in view the enumerated facts, the submissions canvassed and the provisions referred to, it is necessary to appreciate the principle stated in Ranbaxy Laboratories Ltd. [Ranbaxy Laboratories Ltd. v. Union of India, (2011) 10 SCC 292] In the said case, the question arose whether the liability of the Revenue to pay interest under Section 11-BB of the Act commences from the date of expiry of three months from the date of receipt of application for refund or on the expiry of the said period fro....
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....import of the said circular, the Court opined as follows: (Ranbaxy Laboratories Ltd. case [Ranbaxy Laboratories Ltd. v. Union of India, (2011) 10 SCC 292], SCC p. 298, para 16) "16. Thus, ever since Section 11-BB was inserted in the Act with effect from 26-5-1995, the Department has maintained a consistent stand about its interpretation. Explaining the intent, import and the manner in which it is to be implemented, the circulars clearly state that the relevant date in this regard is the expiry of three months from the date of receipt of the application under Section 11-B(1) of the Act." 21. The ultimate conclusion was recorded thus: (Ranbaxy Laboratories Ltd. case [Ranbaxy Laboratories Ltd. v. Union of India, (2011) 10 SCC 292], SCC p. 299, para 19) "19. In view of the above analysis, our answer to the question formulated in para 1 supra is that the liability of the Revenue to pay interest under Section 11-BB of the Act commences from the date of expiry of three months from the date of receipt of application for refund under Section 11B(1) of the Act and not on the expiry of the said period from the date on which the order of refund is made." 22.....
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....nion of India, (1997) 5 SCC 536] , SCC pp. 621-22, para 91) "91. ... Such a holding would run against the very grain of the entire philosophy underlying the 1991 Amendment. The idea underlying the said provisions is that no refund shall be ordered unless the claimant establishes that he has not passed on the burden to others. Sub-section (3) of the amended Section 11-B is emphatic. It leaves no room for making any exception in the case of refund claims arising as a result of the decision in appeal/reference/writ petition. There is no reason why an exception should be made in favour of such claims which would nullify the provision to a substantial degree. So far as 'lack of incentive' argument is concerned, it has no doubt given us a pause; it is certainly a substantial plea, but there are adequate answers to it. Firstly, the rule means that only the person who has actually suffered loss or prejudice would fight the levy and apply for refund in case of success. Secondly, in a competitive market economy, as the one we have embarked upon since 1991-1992, the manufacturer's self interest lies in producing more and selling it at competitive prices - the urge to grow. A favo....
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....under and in accordance with the relevant provisions relating to refund, as they obtained from time to time. We see no unreasonableness in saying so." 24. As far as the said principles are concerned, they are binding on us. But the facts in the case at hand are quite different. It is not a case where the assessee is claiming automatic refund. It is a case that pertains to grant of interest where the refund has been granted. The grievance pertains to delineation by the competent authority in a procrastinated manner. In our considered opinion, the principle laid down in Ranbaxy Laboratories Ltd. [Ranbaxy Laboratories Ltd. v. Union of India, (2011) 10 SCC 292] would apply on all fours to the case at hand. It is obligatory on the part of the Revenue to intimate the assessee to remove the deficiencies in the application within two days and, in any event, if there are still deficiencies, it can proceed with adjudication and reject the application for refund. The adjudicatory process by no stretch of imagination can be carried on beyond three months. It is required to be concluded within three months. The decision in Ranbaxy Laboratories Ltd. [Ranbaxy Laboratories Ltd. v. Union o....
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....and the incidence of such [duty and interest, if any, paid on such duty] had not been passed on by him to any other person: Provided that where an application for refund has been made before the commencement of the Central Excises and Customs Laws (Amendment) Act, 1991, such application shall be deemed to have been made under this sub-section as amended by the said Act and the same shall be dealt with in accordance with the provisions of sub-section (2) as substituted by that Act : Provided [further] that the limitation of [two years] shall not apply where any [duty and interest, if any, paid on such duty] has been paid under protest. [* * *] [(2) If, on receipt of any such application, the Assistant [Principal Commissioner of Central Excise or Commissioner of Central Excise] [or Deputy [Principal Commissioner of Central Excise or Commissioner of Central Excise]] is satisfied that the whole or any part of the [duty of excise and interest, if any, paid on such duty] paid by the applicant is refundable, he may make an order accordingly and the amount so determined shall be credited to the Fund: Provided that the amount of [duty of excise a....
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...., and the Central Government shall seek the approval of Parliament to the notification by a resolution moved within a period of fifteen days beginning with the day on which the notification is so laid before the House of the People and if Parliament makes any modification in the notification or directs that the notification should cease to have effect, the notification shall thereafter have effect only in such modified form or be of no effect, as the case may be, but without prejudice to the validity of anything previously done thereunder. (5) For the removal of doubts, it is hereby declared that any notification issued under clause (f) of the first proviso to subsection (2), including any such notification approved or modified under sub-section (4), may be rescinded by the Central Government at any time by notification in the Official Gazette.] [Explanation.- For the purposes of this section,- (A) "refund" includes rebate of duty of excise on excisable goods exported out of India or on excisable materials used in the manufacture of goods which are exported out of India; (B) "relevant date" means,- (a) in the case of goods exported out o....
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.... to any applicant is not refunded within three months from the date of receipt of application under sub-section (1) of that section, there shall be paid to that applicant interest at such rate, not below [five] per cent and not exceeding thirty per cent per annum as is for the time being fixed [by the Central Government, by notification in the Official Gazette,] on such duty from the date immediately after the expiry of three months from the date of receipt of such application till the date of refund of such duty: Provided that where any duty ordered to be refunded under sub-section (2) of Section 11-B in respect of an application under sub-section (1) of that section made before the date on which the Finance Bill, 1995 receives the assent of the President, is not refunded within three months from such date, there shall be paid to the applicant interest under this section from the date immediately after three months from such date, till the date of refund of such duty. Explanation.- Where any order of refund is made by the Commissioner (Appeals), Appellate Tribunal [National Tax Tribunal] or any court against an order of the Assistant [Principal Commissioner of Ce....
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.... (i) amount determined under Section 11-D; (ii) amount of erroneous CENVAT credit taken; (iii) amount payable under Rule 6 of the CENVAT Credit Rules, 2001 or the CENVAT Credit Rules, 2002 or the CENVAT Credit Rules, 2004.]" "Section 35-FF. Interest on delayed refund of amount deposited under Section 35-F.-Where an amount deposited by the appellant under Section 35-F is required to be refunded consequent upon the order of the appellate authority, there shall be paid to the appellant interest at such rate, not below five per cent and not exceeding thirty-six per cent per annum as is for the time being fixed by the Central Government, by notification in the Official Gazette, on such amount from the date of payment of the amount till, the date of refund of such amount: Provided that the amount deposited under Section 35-F, prior to the commencement of the Finance (No. 2) Act, 2014, shall continue to be governed by the provisions of Section 35-FF as it stood before the commencement of the said Act." 23. The Court, at the outset notes, that Section 11B(1) in clear and unambiguous terms contemplates the making of an application for refund being ma....
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....er fortified when one reads Section 35FF of the 1944 Act. As would be evident from a reading of that provision, Section 35FF as distinct from Section 11B does not require the making of a formal application by the assessee. In fact and contrary to Section 11B, the said provision uses the expression "....there shall be paid to the appellant interest.....". Thus, the language of Section 35FF is an embodiment of the manifest obligation of the respondents to refund the pre-deposit consequent to an order passed by the Appellate Authority notwithstanding an application having not been made by the depositor. 28. The distinction between Sections 11B and 35FF is also evident when one bears in mind the language employed in the latter and which stipulates that interest would commence from the date when the amount deposited by the appellant under Section 35F is required to be refunded consequent to an order passed by the Appellate Authority. Section 35FF thus indicates that interest would commence from the date of the order of the Appellate Authority as distinct from the making of an application which is prescribed to be the starting point insofar as Section 11BB of the 1944 Act is concerned....