Lohia Starlinger Ltd. Vs Commissioner of Central Goods & Services Tax (CESTAT Allahabad)
The Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Allahabad partly allowed the appeal filed by the assessee concerning interest on delayed refund under Section 11BB of the Central Excise Act, 1944. The dispute arose after a portion of the assessee’s sanctioned rebate claim was appropriated against confirmed service tax dues. Following appellate proceedings, the appropriation was set aside, and the amount of Rs. 49,22,148 was refunded. However, no interest on the delayed refund was granted, leading to the present appeal.
The appellant contended that interest under Section 11BB became payable after three months from the date of the refund application and claimed interest on the amount withheld from 14 February 2008 to 29 July 2008. The appellant also sought interest on the delayed payment of such interest, relying on various judicial decisions. The Commissioner (Appeals) rejected both claims, holding that the refund had been granted within the prescribed period after the appellate order and, therefore, interest under Section 11BB was not payable. Since the claim for interest itself was rejected, the claim for interest on interest was also held to be unsustainable.
The Tribunal examined the issue in light of the Supreme Court’s decision in Ranbaxy Laboratories Ltd., which interpreted Section 11BB. It observed that interest under Section 11BB becomes payable if the refund is not granted within three months from the date of receipt of the refund application under Section 11B(1). The Explanation to Section 11BB, which treats an appellate order as an order under Section 11B(2), does not postpone the commencement of interest. The Tribunal held that the only relevant date for computation of interest is three months from the date of the refund application and not the date of the appellate order directing refund. Since the refund application had been filed on 15 November 2007, the appellant became entitled to interest from 15 February 2008 until 29 July 2008 on the amount of Rs. 49,22,148. The Tribunal therefore found the reasoning adopted in the impugned order to be contrary to the law laid down by the Supreme Court.
