TaxTMI 
TaxTMI 
2026 (1) TMI 1440
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....of refund of duty paid by the manufacturers located in the State of Jammu and Kashmir to such manufacturers, but materials supplied by them were treated as duty paid goods. The Appellant availed Cenvat Credit of duty paid on raw materials and used such credit for payment of duty on goods exported subsequently. The Appellant used to file rebate claim for refund of duty paid on goods exported. The Appellant filed 67 rebate claims for the period 2008-09 and 2009-10 claiming rebate of Rs.2,40,08,101/-. The rebate claims were kept pending in view of the fact that an investigation was initiated by the Central Excise Commissionerate, Meerut on the ground that the Appellant was not receiving any goods from the manufacturers based in the State of Jammu and Kashmir but only invoices were procured for availment of CENVAT credit. However, the Department rejected rebate claims in 34 cases out of 67, on the ground that the Appellant availed inadmissible Cenvat credit without receipt of goods. In remaining 33 cases, involving rebate of Rs.1,29,43,690/-, a Show Cause Notice [SCN] was issued on 07.09.2010 for rejection on the ground on which rebate claim in 34 cases was already rejected. 3. Bein....
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....h as the interest under Section 11BB of the Central Excise Act, 1944 would not be applicable in the case of inordinate delay in sanctioning rebate claim. It has been contended that grant of interest @6% is neither sufficient nor justified in view of long pendency of the amount involved and suffering borne by the Appellant. The Learned counsel further submits that 66 rebate claims involving amount of Rs.2,38,88,596/- were kept pending by the Department without any fault of the Appellant for a period of more than 12 years. It has been further submitted that the Commissioner (Appeals) has failed to appreciate the provisions of Section 11BB of the Central Excise Act, 1944 in its true sense. The learned counsel requested to pay interest at a higher rate not lower than 12%. 7. Learned Counsel for the Appellant has further submitted that in a number of judgments pronounced by the Hon'ble Supreme Court of India and various High Courts, higher rate of interest ranging from 12% to 15% have been granted. He placed reliance on the following judgments :- (i) Commissioner of Central Excise, Hyderabad Vs. ITC Ltd. [2005 (179) E.L.T. 15 (SC)]; (ii) Govind Mills Ltd., Vs. Commi....
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....y the Appellant is entitled to interest @ 12% on the sanctioned amount of rebate claim amounting to Rs.2,38,88,596/-. The relevant paragraphs are reproduced for ready reference:- "33. While there may be no specific provision concerning the payment of interest on the delayed refund of the excise duty component of drawback, we may take cue from Section 11BB of the Central Excises Act 1944 which provides for payment of interest on refund of excise duty at a rate not below 5% and not exceeding 30% as may be fixed by the Central Government, if the duty ordered to be refunded is not refunded within 3 months from the date of the application for refund. Section 11BB has been on the statute book since 26-5-1995 and therefore on the date the amount of duty drawback became refundable to the petitioner, i.e. 11-6-1999, this provision applied. Admittedly there is no specific provision regarding payment of interest in the event of delayed refund of a drawback wrongly recovered from an assessee. A reference may however be made to Section 75A read with Section 27A of the Customs Act, 1962 (both introduced from 26-5-1995) where the Parliament appears to have acknowledged the basic principl....
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....ed on 2-61998 by the Central Board of Customs and Excise which in principle recognised the liability of the Government to pay interest on delayed refund of customs and excise duties wrongly collected. It was directed that the petitioner would be entitled to interest at the rate of 12 per cent per annum on the amount of refund from the date of the passing of the order of the Tribunal in that case till the actual payment of the principal amount. In Hello Minerals Water (P) Ltd. v Union of India, the High Court of Judicature at Allahabad explained that requirement of payment of interest on the delayed refund was neither a penalty nor a punishment. Interest was ordered to be paid in that case at 10 per cent per annum from the date of deposit till the date of refund." 11. Further, I find that the Tribunal in the case of M/s Modern Threads India Ltd. vide Final Order No.55944/2024 dated 28.06.2024 has observed as under:- "6. Department has relied upon a decision of the Year 2005. I observe that much water has flown since then on this issue and the issue is no more remains res integra. Section 11B/11BB of Central Excise Act are held as not applicable to the given set of circum....
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....r Section 35FF of Central Excise Act. It was held by the Hon'ble Apex Court that in such cases of refund even the concept of unjust enrichment is not applicable. Learned Apex Court has relied upon its decision in SLP titled as Union of India vs Suvidhe Ltd. in which decision of Bombay High Court in Suvidhe Ltd. vs Union of India reported as 1996 (82) ELT 177 has been upheld. The Bombay High Court has observed that in case of deposits which were not in the form of duty, provisions of 11B of Customs Act will have no applicability. The deposits made under Section 35FF since is not the payment of duty, Section 11B will not be applicable. 8. Another circular of department bearing No. 802/35/2004 CX dated 08.12.2004 was also being considered by the Apex Court in the above mentioned judgment dated 08.04 2015. In that circular the Board emphasised that the amounts other than the amount of duty if deposited it should be refunded immediately as non returning of deposits attract interest that has been granted by the Courts in number of cases. One similar case of Hon'ble Apex Court is the decision of Sandvik Asia Ltd. reported as 2006 (196) ELT 257 (SC) wherein it was held tha....
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.... draw our support from the decision of Hon'ble Apex Court in the case of Sandvik Asia Ltd. which is now the law of land in terms of Article 141 of the Constitution of India. The Hon'ble Apex Court, in the said case, has observed as follows: "45. The facts and the law referred to in paragraph (supra) would clearly go to show that the appellant was undisputably entitled to interest under Sections 214 and 244 of the Act as held by the various High Courts and also of this Court. In the instant case, the appellant's money had been unjustifiably withheld by the Department for 17 years without any rhyme or reason. The interest was paid only at the instance and the intervention of this Court in Civil Appeal No. 1887 of 1992 dated 30.04.1997. Interest on delayed payment of refund was not paid to the appellant on 27.03.1981 and 30.04.1986 due to the erroneous view that had been taken by the officials of the respondents. Interest on refund was granted to the appellant after a substantial lapse of time and hence it should be entitled to compensation for this period of delay. The High Court has failed to appreciate that while charging interest from the assesses, the Department firs....
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....scription; remuneration for loss of time, necessary expenditures, and for permanent disability if such be the result; remuneration for the injury directly and proximately caused by a breach of contract or duty; remuneration or wages given to an employee or officer." The Hon'ble Apex Court thus held that the assessee is entitled to claim interest from the date of payment of initial amount till the date its refund. 11. Following the said law of land, I hold that the appellants are entitled to claim the interest on the amount as has been refunded in their favour that too to be paid from the date of payment of initial amount till the date of its refund. 12. Now comes the question about the rate at which the such interest has to be awarded. From the several provisions of Central Excise Act, as quoted above, it is observed that the rate of interest has to be notified by the Central Government from time to time. I take note of following notifications: (i) The Notification No. 15/2016-CE dated 01.03.2016 issued under Section 11AA of Central Excise Act vide which the Central Government has fixed the rate of interest at 15% per annum for the purpose of sai....