Whether interest is admissible from the date of passing of appellate order or from the original date of filing refund claim?

PJ/Case Law/2014-15/2343

Case:- COMMISSIONER OF CENTRAL EXCISE PUNE-II Vs M/s SULAKI CHEMICALS PVT LTD

Citation:- 2014-TIOL-363-HC-MUM-CX

Brief facts:-The respondent herein (assessee) paid Rs.14,26,952/- as Central Excise Duty to RG 23 Part II account. When it was pointed out by the Department that such duty cannot be paid from RG 23 Part II account, the assessee paid equal amount through PLA and claimed refund of duty paid from RG 23 Part II account from the Asst. Commissioner. The Asst. Commissioner granted him refund of Rs.2,96,349/-and rejected the claim of Rs.11,30,603/-as time barred. Subsequently, on appeal the refund of Rs.11,30,603/- was also allowed. The appellant assessee requested for interest on refund of the said balance amount of Rs.11,30,603/-. The assessee's claim for interest was denied by the Dy. Commissioner of Central Excise and also in appeal by the Commissioner of Central Excise (Appeals). In further appeal before CESTAT, CESTAT allowed the assessee's claim for interest under Section 11BB of the Act. The Tribunal has held that the assessee is entitled to interest with effect from the date of expiry of three months from the date of receipt of the application for refund by the department. The revenue has, therefore, filed the present appeal.

The following questions are proposed by the appellant as substantial questions of law:

(a) Whether in terms of explanation given in Section 11BB, the order passed by the Appellate Authority becomes an Order under subsection (2) namely an order of refund and, therefore, the date of the order of the Appellate Authority is the relevant date for the purpose of refund under Section 11BB?
(b) Whether in view of the aforesaid legal position CESTAT is correct in law in allowing the interest on delayed refund u/s.11BB of the Central Excise Act, 1944?

Appellant’s contentions:-Learned counsel for the appellant Commissioner submitted that since assessee's claim for refund was for the first time allowed by the Commissioner (Appeals), interest would be payable after expiry of three months from the date of order of the Commissioner(Appeals) and not prior thereto. In support, reliance is placed by the learned counsel for the appellant on the Explanation to Section 11BB of the Act.

Respondent’s contentions:-The respondent contention is that the assessee is entitled to interest with effect from the date of expiry of three months from the date of receipt of the application for refund by the department.

Reasoning of judgment:- Section 11BB of the Act, in so far as it relevant provides that if any duty ordered to be refunded under subsection (2) of Section 11B of the Act to any applicant is not refunded within three months from the date of receipt of application under subsection (1) of the section, interest shall be paid to the applicant at the appropriate rate, 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. Explanation to Section 11BB of the Act provides that where any order of refund is made by the Commissioner (Appeals) or the Appellate Tribunal or any Court, the order passed by such Appellate Authority or Court shall be deemed to be an order passed under subsection 2 of Section 11B of the Act for the purpose of this Section. It is, therefore, clear that the appellate order allowing the refund of duty relates back to the order of the original authority and therefore by virtue of substantive Section 11BB of the Act, interest on the refund amount has to be paid from the date immediately after three months from the date of receipt of the application to the original authority till the refund of such duty.

In view of the above findings, the appeal filed by the revenue department is rejected as devoid of any merits.

Decision:- The appeal is dismissed.

Comment:- The essence of the case is that by virtue of substantive Section 11BB of the Act, interest on the refund amount has to be paid from the date immediately after three months from the date of receipt of the application to the original authority till the refund of such duty.

Prepared by: Monika Tak

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PJ/Case Law/2014-15/2343

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