Whether interest payable by revenue on refunds granted beyond three months ?

PJ/Case Law /2016-17/3364

Case:- COMMISSIONER OF CENTRAL EXCISE VersusTHERMAX LTD.
Citation:- 2016 (342) E.L.T. 197 (Bom.)
Issue:- Whether interest payable by revenue on refunds granted beyond three months ?
Brief Facts- After having heard Mr. Bangur at some length and perusing the order under challenge, they were of the view that the respondent/assessee accepted the Order-in-Original, dated 7th November, 1997. The demand under that order was restricted to Rs. 72,84,929/-. Penalty was also imposed.
The demand in the Show Cause Notice was Rs. 1,41,52,531. That was not entirely confirmed, but restricted as above. On the basis of these findings and conclusions in the Order-in-Original, a refund claim was filed. That was earlier rejected by the Assistant Commissioner only on the ground of limitation. The said order was challenged before the Commissioner (Appeals) on 21st November, 2001 and that was allowed. The assessee did not derive any refund, but the amount was adjusted against arrears of Rs. 87,34,160/-. The respondent/assessee filed a claim for interest of Rs. 18,77,109/- on the extra amount of Rs. 35,25,090/- (refund sum claimed) beyond 90 days for the period from March, 1998 to February, 2002. Meaning thereby, until the adjustment was made by the order dated 19th February, 2002, copy of which is at Annexure ‘B’. That having been denied, the assessee preferred an appeal before the Commissioner (Appeals). That was dismissed on 26th July, 2005. However, when the assessee approached the Tribunal, the Tribunal allowed it on the basis of a view taken by the Tribunal that on coming into force of Section 11BB of the Central Excise Act, 1944, the interest is payable on delayed refund. Such was also a view taken earlier by the Tribunal.
Appellant’s Contention:- Mr. Bangur’s contention was (appearing for COMMISSIONER OF CENTRAL EXCISE) that they must see Para 4 of the impugned order and since the pre-deposit was made in the year 1995 prior to 26th May, 1995, the provisions of Section 11BB cannot be applied.
Reasoning of Judgement- The Hon’able judge did not see any substance in this contention for what the governing words were “if any duty ordered to be refunded under sub-section (2) of Section 11B to any applicant is not refunded …….”. Therefore, if that duty ordered to be refunded was not refunded within three months from the date of receipt of application under sub-section (1) of Section 11B, then, the liability to pay interest arose. The Hon’able judge found that the order to refund duty was passed well after Section 11BB was brought on the statute book.

Decision:- Appeal dismissed.
Comment :– the gist of the case is that as the refund of duty deposited by the assessee was not granted within three months the interest was payable by the revenue.
Prepared by- Akshit Bhandari

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PJ/Case Law /2016-17/3364

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