GST UPDATE

Hon’ble Appellate Authority: CESTAT, New Delhi
Case Title: MARUDHAR CONSTRUCTION V/S COMMISSIONER OF CGST & CENTRAL EXCISE, JAIPUR
Appeal No. & Citation: SERVICE TAX APPEAL NO.51755 of 2025

Hon’ble Judge(s)	SHRI SOMESH ARORA, MEMBER (JUDICIAL) & SHRI SANJIV SRIVASTAVA, MEMBER (TECHNICAL)
Date of Order	09 /10/2026
Outcome	Matter moved to Principle Bench

Brief Facts of the Case

The present proceedings arose from conflicting decisions of different Benches of the Customs, Excise and Service Tax Appellate Tribunal concerning the rate of interest payable on refunds of service tax and the date from which such interest becomes payable. The dispute assumed significance in cases where service tax had been deposited by the assessee, including amounts paid under a mistake of law, and the amount was subsequently claimed as refundable. The principal controversy was whether interest on such refunds should be granted at the rate of 12% from the date of deposit or at the statutory rate of 6% under Section 11BB of the Central Excise Act, 1944, read with Notification No. 67/2003-C.E. (N.T.) dated 12.09.2003. A connected question was whether interest should commence from the date on which the amount was deposited or only after the expiry of three months from the date of receipt of the refund application.

Relevant Section & Notification

Section 11BB of the Act
Notification no. 67/2003 dated 12.09.2003

Question before Hon’ble Authority

Whether the quantum of interest can be granted @ 12% or @ 6% read with the provisions of Section 11BB of the Act and the notification no. 67/2003 dated 12.09.2003 considering the divergent views available.

Whether interest in such cases has to be granted with effect from the date of deposit/payment or in terms of section 11BB of the Act after the expiry of three months from the date of receipt of application for refund till the date of payment.

Brief Arguments by Appellant

The appellants relied upon a series of judicial decisions in which interest had been granted at a higher rate, including 12%, on amounts deposited and subsequently refunded. Their case was that where tax had been paid under a mistake of law and was ultimately found refundable, interest should be granted from the date on which the amount was deposited rather than merely from the expiry of three months after the refund application. The appellants specifically relied upon Preet Machines Ltd., 2026 (8) TMI 1066 (CESTAT Allahabad), submitting that the majority view of 2:1 had allowed interest at 12% in a case where tax had been paid under a mistake of law.

S. No.	Case law relied upon by the appellant in support of the claim for interest at a higher rate on refund and for interest from the date of deposit.	Citation
1	Parle Agro Pvt. Ltd.	[2022 (380) ELT 2019 (Tri.-All.)]
2	Kesar Enterprises	2022 (380) E.L.T. 319 (Tri.-All.)
3	Binjrajka Steel Tubes Ltd.	2007 (218) E.L.T. 563 (Tri.-Bang.)
4	Om Jai Bhavani Silk Mills Pvt. Ltd.	2009 (243) E.L.T. 560 (Tri.-Bang.)
5	Andhra Textursing Pvt. Ltd.	2012 (278) E.L.T. 257 (Tri.-Ahmd.)
6	Kandhari Beverages Ltd.	2002 (144) E.L.T. 15 (P&H)
7	Pricol Ltd.	2015 (320) E.L.T. 703 (Mad.)
8	Eveready Industries India Ltd.	2017 (357) E.L.T. 11 (All.)
9	Gujarat Engineering Works	2013 (292) E.L.T. 547 (Tri.-Ahmd.)
10	Ucal Fuel Systems Ltd.	2014 (306) E.L.T. 26 (Mad.)
11	Alar Infrastructures Pvt. Ltd.	order dated 14.10.2015 in CEAC No. 11/2015
12	KVR Construction	2010 SCC OnLine Kar 5419
13	Preet Machines Ltd.	2026 (8) TMI 1066 (CESTAT Allahabad)

Brief Arguments by Respondent

Interest Must Be Governed by the Statute

The Revenue relied upon Section 11BB of the Central Excise Act, 1944 and Notification No. 67/2003-C.E. (N.T.) dated 12.09.2003. It held that Section 11BB categorically provides for interest on delayed payments immediately after the expiry of three months from the date of the receipt of application for refund and the interest shall be payable, not below 5% and not exceeding 30% per annum as may be fixed by the Central Government by notification in the Official Gazette. In this regard, Notification No.67/2003–CE(NT) dated 12.09.2003 determines the rate of interest at 6%.

Preet Machines Ltd. Was Distinguishable

The Revenue argued that the decision in Preet Machines Ltd. was distinguishable. According to the Revenue, the third member had decided the matter in favour of the assessee by relying on the jurisdictional High Court decision without adequately addressing the points of difference and the reasons recorded in the order and the Supreme Court decisions relied upon by the Technical Member. Further, the Allahabad High Court decision concerned a distinct period and different statutory provisions.

S. No.	Case Laws Relied upon by the Department to hold that claim for interest must be determined under the statutory provisions, particularly Sections 11B and 11BB of the Central Excise Act, 1944	Citation
1	ONGC Ltd.	2024 (6) TMI 1417 (CESTAT Chennai), decided 20.06.2024
2	Karanja Terminal & Logistics Pvt. Ltd.	2024 (10) TMI 1060 (CESTAT Mumbai), decided 30.08.2024
3	Brigade Corporation India (P) Ltd.	2025 (11) TMI 839 (CESTAT Hyderabad), date recorded as 30.07.2024
4	Triumph International (India) Pvt. Ltd.	2024 (7) TMI 300 (CESTAT Chennai), date recorded as 07.07.2024
5	Mahindra Engineering & Chemical Products Ltd.	2019 (368) E.L.T. 84 (Tri.-Mum.), decided 13.07.2018
6	KBS Enterprises & Others Vs. Commissioner of Central Excise & Service Tax, Jaipur	[Final Order No.51180-51184/2026 dated 14.07.2026]
7	DSM Sugar	Final Order No. 70790/2025 dated 13.11.2025 in Excise Appeal No. 70189/2021

Findings and Judgement

Statutory Rate of Interest under Section 11BB
Considering the conflicting views on the matter, the Tribunal upon detailed analysis of Section 11BB and Notification No. 67/2003-C.E. (N.T.), the Bench noted that, under the statutory framework, interest on delayed refunds commences after the expiry of three months from the date of receipt of the refund application and at the rate of 6 %. The controversy arose because certain decisions had granted interest from the date of deposit, notwithstanding the statutory commencement date.

Tribunal’s is a Creature of Statute and cannot bypass the same

The Tribunal discussed the distinction between the powers of constitutional courts and those of statutory tribunals. It observed that the Tribunal derives its jurisdiction and powers from the statute under which it is constituted and does not possess the same constitutional jurisdiction as the High Courts under Article 226 or the Supreme Court under Article 32. In this context, reliance was placed on the decision of Northern Plastics Ltd. v. Hindustan Photo Films Mfg. Co. Ltd., AIRONLINE 1997 SC 603, and K.S. Venkataraman & Co., AIR 1966 SC 1089.

Decision in case of Veer Overseas was distinguished

The Tribunal considered the decision of the three-member Larger Bench in Veer Overseas, which had decided by a majority of 2:1 that refund claims should be governed by the provisions of the taxing statute. The majority view in Veer Overseas proceeded on the basis that where an assessee had paid an amount as service tax and approached the jurisdictional tax authority for its refund under Section 11B, the statutory refund mechanism could not ordinarily be applied selectively. The assessee could not rely upon Section 11B for the purpose of claiming a refund while contending that its other provisions including limitation, were inapplicable. The majority further distinguished relief granted by constitutional courts in writ jurisdiction from the powers of statutory authorities and the Tribunal. It relied upon Mafatlal Industries Ltd. v. Union of India, 1997 (89) E.L.T. 247 (S.C.), in support of the principle that refund claims are ordinarily required to be made under the statutory provisions, subject to the recognised exception concerning an unconstitutional levy.
The present Larger Bench also reproduced the minority view in Veer Overseas. The minority relied upon Parijat Construction v. CCE, Nashik, 2018 (359) E.L.T. 113 (Bom.), and CCE, Nagpur v. SGR Infratech Ltd., Central Excise Appeal No. 26/2014, decided on 28.10.2015, in support of the proposition that the limitation under Section 11B would not apply to refunds of service tax paid under a mistake of law.
Various case laws were Referred

S. No.	Case law name	Citation	Crux of the judgment
1	M/s Goldy Engineering v. Commissioner of Central Excise	W.P. (C) Nos. 4332 and 12143 of 2022, decided on 14.07.2023; affirmed by Supreme Court, 2025 (393) E.L.T. 456 (S.C.) [09.04.2025]	Delhi High Court emphasized that a refund application is not an empty formality. The claimant must furnish the prescribed declaration and documentary evidence and pass test of unjust enrichment. Affirmed by Supreme Court.
2	Manisha PharmoPlast Pvt. Ltd. v. Union of India	2020 (374) E.L.T. 145 (S.C.) [06.08.2020]	Rejected the contention that interest should be calculated from the date other than the date prescribed under Section 11BB as of the view taken in Ranbaxy Laboratories Ltd. v. Union of India. (Relevant para: 4)
3	Union of India v. Hamdard (Waqf) Laboratories	2016 (333) E.L.T. 193 (S.C.) [25.02.2016]	It affirms the principle applied in Mafatlal Industries case that all refunds claims, except unconstitutional levy, must be dealt with under Section 11B.
4	Ranbaxy Laboratories Ltd. v. Union of India	2011 (273) E.L.T. 3 (S.C.) [21.10.2011]	Interest commences after expiry of three months from the date of receipt of the refund application under Section 11B(1). (Relevant para: 15)
5	Commissioner of Income Tax, Gujarat v. Gujarat Fluoro Chemicals	2017 (51) S.T.R. 236 (S.C. – Larger Bench) [18.09.2013]	The decision in Sandvik Asia was misquoted and misinterpreted. The direction was to pay compensation for inordinate delay in refunding amounts, including statutory interest, and not interest on interest. Only statutory interest can be claimed, and no other interest on such statutory interest.
6	Nino Chaks Pvt. Ltd. v. Commissioner of Customs (General)	2020 (371) E.L.T. 701 (Delhi) [04.09.2019]	Interest on voluntary deposits made before issuance of a show-cause notice cannot be granted where the payments were not shown to be involuntary. Interest cannot be granted merely on equitable considerations.
7	Mafatlal Industries Ltd. v. Union of India	1997 (89) E.L.T. 247 (S.C. – Nine Judges Bench) [19.12.1996]	It was held that all claims except where levy is held to be unconstitutional, is to be preferred and adjudicated upon under Section 11B of the Central Excise Act, 1944 or under Section 27 of the Customs Act, 1962 and subject to claimant establishing that burden of duty has not been passed on to a third party. Writ jurisdiction must be exercised to effectuate the regime of law and not to abrogate it.
8	Andrew Telecom I Pvt. Ltd. v. Commissioner of Customs & Central Excise	2014 (34) S.T.R. 562 (Bom.) [03.04.2014]	A refund application filed beyond one year from the date of payment cannot be entertained, even where payment was made under a bona fide mistake. Article 226 cannot be invoked to override the statutory refund regime under Section 11B.
9	Singh Enterprises v. Commissioner of C. Ex., Jamshedpur	2010 (258) E.L.T. 186 (Jhar.) [03.01.2006]	Appellate authority having no power to condone delay beyond period of 30 days from date of expiry of 60 days prescribed for filing statutory appeal, rejected same. No relief can be granted by exercising a power unavailable to the Court under Article 142.
10	Willowood Chemicals	2022 (60) G.S.T.L. 3 (S.C.)	Where a statute specifies or regulates interest, interest is payable in terms of the statutory provisions. Where the statute is silent and there is no express bar, reasonable interest may be awarded on equitable grounds. A specific statutory provision must govern the grant of interest.
11	Electrosteel Casting Limited	Order dated 08.09.2026 in CEXA 26 of 2025, Calcutta High Court	Since the matter has been decided contrarily by two benches of higher strength, it needs to be referred to the President for constitution of the appropriate bench.

In view of the principles laid down in the above referred judgement, following prepositions needs to be resolved by the larger bench:

Refund of amount paid Voluntary
Mistake of Law - where the taxpayer and the authorities operated under a shared misconception of the law
Mistake of fact – Where it is later realised that impugned service tax was not-payable

The following questions needs to be addressed in respect of Self assessed (Voluntary) Duty/Tax:
Q1. Whether the refund shall be filed under Section 11B of the CEA or not?
Q2. Whether the general law of limitation (as per Section 11B or General law of limitation) will apply or not?
Q3. Whether interest under Section 11BB is admissible where refund of service tax is claimed beyond the limitation period prescribed under Section 11B.
Q4. From which date interest on refund is payable: from the date of deposit or after expiry of three months from the date of filing the refund application under Section 11B.
Q5. Whether interest is payable at the statutory/notified rate of 6% under Section 11BB read with Notification No. 67/2003 dated 12.09.2003, or at a higher rate.

Refund of Involuntary Deposit
Unconstitutional Levy or Levy exceeds constitutional limits-tax was collected are found to be unconstitutional, invalid, or entirely outside the legislative competence
Illegal Levy- where the authorities have acted without jurisdiction or in-violation of fundamental principles of procedures
Ordinary errors of interpretation or Assessment within statutory competence are primarily for the statutory machinery– where ax authorities misinterpreted, misapplied, or erroneously interpreted the law, statutory orders, notifications, classification etc.

The following questions needs to be addressed in respect of involuntary deposits of duty/tax :
Q1. Whether the refund shall be filed under Section 11B of the CEA or Section 27 of the CA or not?
Q2. Whether the general law of limitation (or Section 11B) will apply or not?
Q3. can interest be claimed under Section 11BB if refund claimed beyond the limitation in Section 11B?
Q4. From which date interest on refund is payable: from the date of deposit or after expiry of three months from the date of filing the refund application under Section 11B.
Q5. Whether interest is payable at the statutory/notified rate of 6% under Section 11BB read with Notification No. 67/2003 dated 12.09.2003, or at a higher or penal rate in cases of proven default or inordinate delay attributable to the Department?
General Questions on Statutory Powers and Equitable Relief
The Tribunal also referred the following general questions:

How voluntary and involuntary payments or deposits should be distinguished.
Whether the proper officer, first appellate authority or Tribunal must adhere to Section 11B when deciding the principal refund claim or may apply equitable principles.
Whether the statutory provisions of Sections 11B and 11BB must govern interest claims or whether equitable relief may be granted beyond those provisions.
Whether decisions granting interest at 6% or 12% in particular cases have precedential value for the Tribunal or should be confined to the exercise of equitable jurisdiction.
Whether interest at 9% can be granted under Rule 41 of the CESTAT (Procedure) Rules, 1982, beyond the provisions of Section 11BB, as considered by the Calcutta High Court in Electrosteel Casting Limited, order dated 08.09.2026 in CEXA No. 26 of 2025.

Hence the matter was referred to larger bench of five members and it will decide the matter.

CA Pradeep Jain_

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GST update /2026-27/0101

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Brief Facts of the Case

Relevant Section & Notification

Question before Hon’ble Authority

Brief Arguments by Appellant

Brief Arguments by Respondent

Findings and Judgement

Opinion

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