Availment of interest on delayed refund.

PJ/Case Law/2014-15/2193

Case:- STATE BANK OF INDIA V/S COMMMISSIONER OF SERVICE TAX, MUMBAI-I

Citation:- 2014 (34) S.T.R. 579 (Tri. – Mumbai)

Brief facts:- Briefly stated the facts were that the appellants were engaged in providing banking and other financial services and was also engaged in the business of purchase and sale of foreign exchange and having service tax registration no. AAACS8577KSTET1. They filed refund claim on 4-3-2009 amounting to Rs. 2,79,72,197/- on the ground of excess payment of service tax for the month of June, 2008. The lower authority returned the refund application with deficiency in it. The appellant after removing the deficiency re-submitted the refund claim on 26-3-2009. The lower adjudicating authority rejected the refund claim filed by the appellant. The appellant challenged the order before the Commissioner (Appeals). The Commissioner (Appeals) vides Order no. V2(A)/STC/312/2009, dated 30-3-2010 allowed the refund claim. Thereafter the appellant filed a claim for interest. The lower adjudicating authority vide order dated 20-7-2010 rejected the claim. Aggrieved by the same, the appellant filed appeal before the Commissioner Appeals) who vide his order dated 18-7-2012 rejected their appeal. Hence this appeal.

Appellant’s contentions:-The contention of the appellant was that they have filed the refund claim on 4-3-2009 and refund was finally sanctioned by the Commissioner (Appeals)vide his order dated 30-3-2010. Therefore, as per the provisions of section 11BB of the Central Excise Act, 1944 they were entitled for interest till receipt of the refund on 6-7-2010. In support of their contention, they have relied upon the decision of the Hon’ble Supreme Court in the case of Ranbaxy Laboratories Ltd. V. Union of India reported in 2011 (273) E.L.T. (S.C.) = 2012 (27) S.T.R. 193 (S.C.) and also the Hon’ble Bombay High Court’s decision in the case of union of India through Maritime Commissioner of Central Excise v. Jindal Drugs Ltd. – 2012 (190) E.C.R 3 (Bombay).

Respondent’s contentions:- The learned Additional Commissioner (AR) reiterated the findings of the learned Commissioner (Appeals). However, he contended that the deficiency memo was issued to the appellant and they have removed the defects only on 26-3-2009.

Reasoning of judgment:- We have carefully considered the submissions and perused the records. The appellant was heavily relying upon section 11BB of the Central Excise Act, 1944, which reads as under:
SECTION 11BB. Interest on delayed refunds.-If any ordered to be refunded under sub-section (2) of section 11B to any applicant was 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 appellant interest as such rate, not below five percent and not exceeding thirty percent per annum as was 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 11B 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, was not refunded within three months from such date, there shall be paid to the application 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 was made by the Commissioner (Appeals), Appellant Tribunal, National Tax Tribunal or any court against an order of the Assistant of Central Excise or Deputy Commissioner of Central Excise, under sub-section (2) of the section 11BB, the order passed by the Commissioner (Appeals), Appellate Tribunal, National Tax Tribunal or, as the case may be , by the court shall be deemed to be an order passed under the said sub-section (2) for the purpose of this section.
The tribunal found that the appellant filed the refund claim for the service tax paid in excess. This fact was not in dispute. Therefore, as per the provisions of section 11B of the Central Excise Act, 1944 they were entitled for the interest from three months after the date of filing of the refund claim till the receipt of the refund. The appellant relied upon the decision of the Hon’ble Supreme Court in the case of Ranbaxy Pharmaceuticals (supra). Para 15 of the said decision reads as under:
“15. In view of the above analysis, our answer to the question formulated in para (1) supara was that the liability of the revenue to pay interest under section 11BB 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 order of refund was made.”
However, we find that the appellants were issued deficiency memo since they have not filed the refund claim after removing the deficiency in all respects and they have filed refund claim after removing the deficiency in all respects only on 26-3-2009. This fact was also not in dispute. Therefore, the interest on the refund will commence three months after the date of removal of deficiency in the claim i.e. from 26-3-2009 till the date of receipt of the refund.

Decision:- The appeal was allowed.

Comment:- the analogy of the present case was that it was well settled that the assessee was entitled to recieveinterest under section 11BB 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 order of refund was made.” It was worth noting that in case the assessee had been issued a deficiency memo, the relevant date for grant of interest shall be 3 months after the date of removal of deficiency in the claim.

Prepared by:- Monika Tak

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