Delayed sanction of Refund beyond 3 months - whether Interest payable on the same?

PJ/Case Laws/2011-12/1546

Case: COMMISSIONER OF C. EX., LUCKNOW v/s RELIANCE INDUS. LTD.

Citation: 2012 (25) S.T.R. 201 (Tri.-Del.)

Issue:- Whether assessee entitled for interest on delayed sanction of refund claim beyond three months of the date of application of refund?

Brief Facts:- Respondents filed refund claim on accumulated Cenvat credit availed on inputs in manufacture and export of poly staple fibre without payment of Central Excise duty under bond for the period July, 2006 to September, 2006 on 16-1-2007. The refund claim was sanctioned on 11-10-07. No interest was sanctioned on delayed refund.

Aggrieved from the same, respondents filed appeal before the Commissioner (Appeals) who remanded the matter to decide the issue of interest in light of Section 11BB of the Central Excise Act, 1944 and revised instructions of Board. The Assistant Commissioner disallowed the interest on delayed payment of refund without personal hearing. Against that order the respondents preferred appeal before the Commissioner (Appeals) who set aside the order of denial of interest on delayed refund and allowed the interest to be paid on the delayed refund. Against the said order Revenue is in appeal before this Tribunal.

Appellant’s Contention:- Revenue contended that in this case the respondents had filed the refund claim on 16-1-07 but without proper documents as required in the appendix of Cenvat Credit Procedure clause '6' which is reproduced as the application in Form A, along with the prescribed enclosures and the relevant extracts of the records maintained under the Central Excise Rules, 2002, Cenvat Credit Rules, 2004, or the Service Tax Rules, 1994, in original, are filed with the Deputy Commissioner of Central Excise or the Assistant Commissioner of Central Excise, as the case may be, before the expiry of the period specified in section 11B of the Central Excise Act, 1944 (1 of 1944). And when the respondents complied with the defect memo, the refund claim was sanctioned within prescribed time limit. Hence, interest is not payable at all. He also relied on Puja Poly Plastic Pvt. Ltd. v. CCE, Kolkata reported in 2004 (171) E.L.T. 484 (Tri-Kol).

Respondent’s Contention:- Respondent argued that he had filed the refund claim on 16-1-07. The refund claim was returned on 5-4-07 seeking some documents/extracts of relevant records are not enclosed with the refund claim. He submitted that the refund claim again on 9-4-07 enclosing the documents required by letter dated 5-4-07. Thereafter the refund claim was sanctioned only on 11-10-07. He also submitted that as per sub-Regulation 2(3) of Customs Refund Application (Form) Regulations, 1995, where on scrutiny if the application is found to be incomplete, the proper officers shall, within 10 working days of its receipt return the application to the applicant pointing out the deficiency. As the deficiency memo was not issued within 10 days of the receipt of refund claim, the respondents is entitled to receive the interest on delayed refund. To support this contention, he placed reliance on CCE, Hyderabad v. Paris Waves reported in [2008 (224) E.L.T. 295 (Tri-Bang)].

Reasoning of Judgment:- The Tribunal held that in this case the respondents filed the refund claim on 16-1-07 which was sanctioned to them on 11-10-07. As per Customs Refund Application (Form) Regulations, 1995, the assessee has to file refund claim as prescribed under these regulations and on receipt of this application, the proper officer has to scrutinize the same and within 10 working days of the receipt, if it is found that there is some deficiency in the refund claim, the same is to be returned within 10 days to the assessee. It is evident from the record that the deficiency memo was issued on 5-4-07 which is beyond the period of 10 days of receipt of refund claim. Moreover, the respondent has complied with the required documents asked by the deficiency memo dated 5-4-07 on 9-4-07 but thereafter the refund claim was sanctioned only on 11-10-07 which is also beyond three months of the receipt of refund claim again on 9-4-07. As the proper officer has to sanction the claim of refund within three months of the date of application of refund, the respondent is entitled for interest on delayed refund. The case law by the appellant in the case of Puja Poly Plastics Ltd. cited supra also support the case of the respondents wherein it was held that the assessee is entitled to interest after the expiry of three months from the date of filing the refund claim after removing the defects.

In the case of CCE, Hyderabad v. Paris Waves, the Tribunal has dealt with the issue in detail wherein the paragraph 4 of the said order is relevant to the facts of this case. It was held in that case that when the competent authority delayed the refund claim for one reason or another, the interest under 11BB immediately after the expiry of three months from the date of receipt of refund claim. In this case also, the proper officer has to sanction the refund claim within 3 months of receipt of application on 16-1-07. Hence, as per the provisions of section 11BB of the Act, the respondents is entitled to claim the interest beyond the period of three months of the date of filing of application for refund claim till the refund claim is realized as held by the lower appellate authority.

Decision:- Appeal rejected.

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PJ/Case Laws/2011-12/1546

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