Interest on delayed sanction of refund is admissible after expiry of 3 months from date of filing original refund application.

PJ/CASE LAW/2016-17/3162

Case:-TATA CHEMICALS LTD. VERSUS COMMISSIONER OF C. EX., RAJKOT

Citation:-2016 (334) E.L.T. 133 (Tri. - Ahmd.)

Brief Facts:-This appeal has been filed by the appellant with respect to OIA No. 573/2006/491(RAJ)COMMR(A)/RP/RAJ, dated 13-10-2006. The issue involved in the present appeal is whether appellant is eligible to interest under Section 11BB of the Central Excise Act 1944, on the sanctioned and paid refund claim of Rs. 1,26,18,767.00 starting from three months from the date of making refund application to the payment of refund amount.

Appellant’s Contention:-Appellant filed eleven refund claims during the period September, 1997 to December, 1999. The refund claims were rejected by the adjudicating authority and that order was agitated before Commissioner (Appeals) who vide OIA dated 24-9-2001 rejected the appeal filed by the appellant. That on an appeal filed by the appellant, CESTAT vide Final Order dated 13-8-2003 allowed the appeal filed by the appellant. That as a result of CESTAT’s order dated 13-8-2013, appellant was sanctioned and paid refund of Rs. 1,26,78,767.00 on 23-2-2004. That since there was a delay in sanction/payment of refunds, for more than three months of refund applications upto the date of payment (23-2-2004), appellant asked for interest on delayed payment of interest under Section 11BB of Central Excise Act, 1944. This request was rejected by adjudicating authority under OIO dated 24-4-2006 which was upheld by first appellate authority under OIA dated 13-10-2006. It was further argued by the ld. Advocate that as per the provisions of Section 11BB of the Central Excise Act, 1944 the interest payment is due after a period of three months from the date of refund application till the payment of refund. That there is no clause in these provisions that date of payment of interest gets postponed by any order of the Court. He relied upon the following case laws : -

(i)        M/s. Tirupati Pipe & Allied Industries Pvt. Ltd. v. CCE - 2008 (227) E.L.T. 247 (Tri.-Mum.)
(ii)       M/s. Aglowmed Ltd. v. CCE, Vapi - 2009 (233) E.L.T. 413 (Tri.-Ahmd.)
(iii)      M/s. Ranbaxy Laboratories Ltd. v. UOI - 2011 (273) E.L.T. 3 (S.C.) = 2012 (27) S.T.R. 193 (S.C.)
(iv)      M/s. J.K. Cement Works v. ACCE & C - 2004 (170) E.L.T. 4 (Raj.) and AC v. M/s. J.K. Cement Works - 2005 (179) E.L.T. A150 (S.C.)
(v)       Jayanta Glass Ltd. v. CCE, Kolkata - 2004 (165) E.L.T. 516 (Tri.-LB)
(vi)      Rama Vision Ltd. v. CCE, Meerut - 2004 (170) E.L.T. 13 (Tri.-LB)
(vii)     M/s. Surajbhan Synthetics (P) Ltd. v. CCE - 2014 (301) E.L.T. 386.

Respondent’s Contention:-The respondent contended that as per Explanation to Section 11BB of the Central Excise Act, 1944 the orders passed by CESTAT will be deemed to be an order passed under Section 11B(2) of the Central Excise Act, 1944 and refunds of the appellants were decided within 3 months from the date of CESTAT’s order. Ld. AR, therefore, strongly defended the orders passed by the lower authorities in rejecting appellant’s claim for interest on delayed payment of refunds.

Reasoning Of Judgment:- The issue involved in the present appeal is whether appellant will be eligible to claim interest after three months of the refund claim applications, which were filed during September, 1997 to December, 1999, and the refund claims were sanctioned/paid to the appellant on 23-2-2004. It is the case of the Revenue that there was no delay in the sanction of refund claims as per Explanation to Section 11BB of the Central Excise Act, 1944 and that the refunds were sanctioned and paid within 3 months from the date of CESTAT’s order. It is seen from the relied upon case laws that the issue is no more res integra. Hon’ble Apex Court in the case of Ranbaxy Laboratories Ltd. v. UOI [2011 (273) E.L.T. 3 (S.C.) = 2012 (27) S.T.R. 193 (S.C.)] in paras 11, 12, 14 & 15 of the law held as follows : -

At this juncture, it would be apposite to extract a Circular dated 1st October, 2002, issued by the Central Board of Excise & Customs, New Delhi, wherein referring to its earlier Circular dated 2nd June, 1998, whereby a direction was issued to fix responsibility for not disposing of the refund/rebate claims within three months from the date of receipt of application, the Board has reiterated its earlier stand on the applicability of Section 11BB of the Act. Significantly, the Board has stressed that the provisions of Section 11BB of the Act are attracted “automatically” for any refund sanctioned beyond a period of three months. The Circular reads thus :

“Circular No. 670/61/2002-CX, dated 1-10-2002

F. No. 268/51/2002-CX.8
Government of India
Ministry of Finance (Department of Revenue)
Central Board of Excise & Customs, New Delhi

Subject :          Non-payment of interest in refund/rebate cases which are sanctioned beyond three months of filing - Regarding

I am directed to invite your attention to provisions of Section 11BB of Central Excise Act, 1944 that wherever the refund/rebate claim is sanctioned beyond the prescribed period of three months of filing of the claim, the interest thereon shall be paid to the applicant at the notified rate. Board has been receiving a large number of representations from claimants to say that interest due to them on sanction of refund/rebate claims beyond a period of three months has not been granted by Central Excise formations. On perusal of the reports received from field formations on such representations, it has been observed that in majority of the cases, no reason is cited. Wherever reasons are given, these are found to be very vague and unconvincing. In one case of consequential refund, the jurisdictional Central Excise officers had taken the view that since the Tribunal had in its order not directed for payment of interest, no interest needs to be paid.

In this connection, Board would like to stress that the provisions of Section 11BB of Central Excise Act, 1944 are attracted automatically for any refund sanctioned beyond a period of three months. The jurisdictional Central Excise Officers are not required to wait for instructions from any superior officers or to look for instructions in the orders of higher appellate authority for grant of interest. Simultaneously, Board would like to draw attention to Circular No. 398/31/98-CX., dated 2-6-1998 [1998 (100) E.L.T. T16] wherein Board has directed that responsibility should be fixed for not disposing of the refund/rebate claims within three months from the date of receipt of application. Accordingly, jurisdictional Commissioners may devise a suitable monitoring mechanism to ensure timely disposal of refund/rebate claims. Whereas all necessary action should be taken to ensure that no interest liability is attracted, should the liability arise, the legal provision for the payment of interest should be scrupulously followed.”

Thus, ever since Section 11BB was inserted in the Act with effect from 26th May 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 11B(1) of the Act.

At this stage, reference may be made to the decision of this Court in Shreeji Colour Chem Industries (supra), relied upon by the Delhi High Court. It is evident from a bare reading of the decision that insofar as the reckoning of the period for the purpose of payment of interest under Section 11BB of the Act is concerned, emphasis has been laid on the date of receipt of application for refund. In that case, having noted that application by the assessee requesting for refund, was filed before the Assistant Commissioner on 12th January, 2004, the Court directed payment of Statutory interest under the said Section from 12th April, 2004 i.e. after the expiry of a period of three months from the date of receipt of the application. Thus, the said decision is of no avail to the Revenue.

In view of the above analysis, answer to the question formulated in para (1) supra is 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 is made.

In view of the above law laid down by the Hon’ble Apex Court and the provisions of Section 11BB, there is no provision under Section 11BB of the Central Excise Act, 1944 that relevant date for determining the rate of interest will be postponed in any eventuality. As per these provisions, interest payment accrues from the expiry of three months from the date of refund applications made under Section 11B(1) of the Central Excise Act, 1944.

Decision:-Appeal allowed.

Comment:-The gist of the case is that interest under section 11BB of the Central Excise Act, 1944 is admissible from the date of filing of original refund application and not from the date of appellate authority order granting refund claim. This view is supported by the Apex Court decision given in the case of Ranbaxy Laboratories Ltd.

Prepared By: - Alakh Bhandari

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PJ/CASE LAW/2016-17/3162

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