Interest on delayed refund is permissible from expiry of 3 months’ from the date of filing of Refund application and not from the date of Refund Order

Dear Professional Colleague,

Interest on delayed refund is permissible from expiry of 3 months’ from the date of filing of Refund application and not from the date of Refund Order

We are sharing with you an important judgment of Hon’ble CESTAT, Ahmedabad, in the case of Tata Chemicals Ltd. Vs. Commissioner of Central Excise, Rajkot [2015-TIOL-240-CESTAT-AHM] on the following issue:

Issue:

Whether Interest on delayed refund is permissible from expiry of 3 months from the date of filing Refund application?

Facts & background:

In the present case, Tata Chemicals Ltd. (“the Appellant”) filed eleven Refund claims amounting to Rs. 1,26,78,767/- during the period September 1997 to December 1999. However, the Refund claims were initially rejected by the Adjudicating Authority and the Ld. Commissioner (Appeals).

However, the same were allowed by the Hon’ble CESTAT, Ahmedabad vides its Order dated August 13, 2003 which was paid to the Appellant on February 23, 2004.

Since there was a delay in sanction and payment of Refunds, for more than three months from the date of filing of Refund applications, the Appellant applied for interest on delayed payment of Refunds under Section 11BB of the Central Excise Act, 1944 (“the Excise Act”) up to the date of refund  i.e., February 23, 2004.

However, this request was rejected by Adjudicating Authority, which was followed by the Ld. Commissioner (Appeals). Being aggrieved, the Appellant preferred an appeal before the Hon’ble CESTAT, Ahmedabad.

The Appellant relying upon following cases:

a. Tirupati Pipe & Allied Industries Pvt. Ltd. Vs. CCE 2008 [(227) ELT 247 (Tri-Mum) 2007-TIOL-1862-CESTAT-MUM]

b. Ranbaxy Laboratories Ltd Vs. UOI [2011 (273) ELT 3 (S.C.)] (“the Ranbaxy Laboratory case”).

c. J.K. Cement Works Vs. ACCE & C 2004 (170) ELT 4 (Raj.) and AC Vs M/s J.K. Cement Works [2005 (179) ELT A-150 (S.C.)]

d. Jayanta Glass Ltd Vs. CCE Kolkata [2004 (165) ELT 516 (Tri-LB)]

e. Rama Vision Ltd Vs. CCE Meerut [2004 (170) ELT 13 (Tri-LB)]

f. Surajbhan Synthetics (P) Ltd Vs. CCE [2014 (301) ELT 386]

submitted that as per the provisions of Section 11BB of the Excise Act, the interest payment is due after a period of three months from the date of Refund application till the payment of Refund. There is no clause under Section 11BB of the Excise Act providing that the date of payment of interest gets postponed by any order of the Court.

On the other hand, the Revenue argued that as per Explanation to Section 11BB of the Excise Act, the Order passed by the Hon’ble CESTAT, Ahmedabad will be deemed to be an Order passed under Section 11B(2) of the Excise Act and since Refunds of the Appellant were decided within 3 months from the date of the Hon’ble CESTAT's Order, no interest is payable.

Held:

The Hon’ble CESTAT, Ahmedabad relying upon the decision in the Ranbaxy Laboratory case held that under Section 11BB of the Excise Act, there is no provision 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 3 months from the date of Refund application made under Section 11B(1) of the Excise Act. Thus, the Appellant is rightly entitled for interest on delayed Refund from the date of filing of refund applications till the date of payment.

Our Comments:

Recently, in the case of Vodafone (I) Ltd. Vs. Commissioner of Service Tax, Mumbai-I [2014-TIOL-2263- CESTAT-MUM], Hon’ble CESTAT, Mumbai, held that the Authorities have to take expeditious steps to sanction the Refund claim keeping in mind that the interest is to be paid from the kitty of the general public. The Hon’ble Tribunal further ordered that the copy of the Order be sent to the Chairman, CBEC, Secretary (Rev), the Ministry of Finance and the Hon'ble Finance Minister for necessary consideration.

Hope the information will assist you in your Professional endeavors. In case of any query/ information, please do not hesitate to write back to us.

Thanks & Best Regards,

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