Case Law Details
Bhilosa Industries Pvt. Ltd. Vs C.C.E. & S.T. (CESTAT Ahmedabad)
Introduction: In the case of Bhilosa Industries Pvt. Ltd. vs. C.C.E. & S.T., the main issue revolves around the entitlement of interest on the sanctioned refund and the application of Section 11BB of the Central Excise Act, 1944.
Detailed Analysis: The crux of the matter lies in the timeline of the refund claim filed on 19.05.2005 and its sanction on 04.04.2016. Section 11BB mandates interest if the duty ordered to be refunded is not processed within three months from the application date. In this case, the Appellant claimed interest from 20-8-2005 to the actual payment date, 04-4-2016.
The CESTAT Ahmedabad’s analysis emphasizes the statutory obligation for the department to sanction refunds with interest after three months from the filing date. The key reference is Section 11BB, specifying that interest is payable from three months after the application date until the duty refund.
The appellant’s argument is supported by various legal precedents, including the Hon’ble Supreme Court’s judgment in the case of M/s. Ranbaxy Laboratories Ltd. vs. Union of India (2011) 273 E.L.T. 3 (S.C.).
Conclusion: The CESTAT Ahmedabad, considering the statutory mandate, legal precedents, and circulars, concludes that the appellant is entitled to statutory interest from 20-8-2005 to 04-4-2016. The judgment sets aside the impugned order and grants relief to Bhilosa Industries Pvt. Ltd.
This detailed article provides insights into the Bhilosa Industries Pvt. Ltd. vs. C.C.E. & S.T. case, highlighting the legal perspective, interpretation of Section 11BB, and the decisive factors leading to the CESTAT Ahmedabad’s ruling in favor of the appellant.
We find that the limited issue involved is that from which date the appellant is entitled for interest on the sanctioned refund. As per the facts of the present case, we find that there is no dispute about the fact that the refund claim had been filed on 19.05.2005 and the same was sanctioned only vide order-in-original both dated 04.04.2016. We also noticed that in the present matter both the adjudicating authority considered the letter dated 23.11.2015 as refund claim application, whereas vide letter dated 23.11.2015 appellant only informed the Jurisdictional Deputy Commissioner that CESTAT has passed order in their favour and accordingly to sanction the refund amount along with interest.
Section 11BB of Central Excise Act, 1944 clearly stipulates that if any duty is ordered to be refunded under sub-section (2) of Section 11B of the Act to the applicant and the same is not refunded within three months from the date of receipt of such application under sub-section (1) of Section 11B of the Act, then the applicant would be entitled to interest. This interest would be payable immediately after the expiry of three months from the date of receipt of such application till the date of refund of the duty. In a nutshell, what this section stipulates is that, once an application for refund has been made and the same is granted within a period of three months of receipt of such application, there would be no liability to pay interest. However, if the refund is granted after the expiry of the period of three months from the date of receipt of the application, then interest would also be payable on the amount of refund granted, from the date immediately after the expiry of three months from the date of receipt of such application, till the date of refund.
As per the statutory mandate of Section 11BB of the Act the department is under legal obligation to sanction the refund claim along with interest after the expiry of 3 months from the date of filing of the refund claim. In the present matter the time limit for payment of the refund amount to the Appellant by the Central Excise authorities (without interest) expired on 1908-2005. Since, claimed amount was finally paid to the Appellant on 04.04.2016, in our considered view, the Appellant is entitled for the statutory interest from 20-8-2005 to the date when the refund was eventually paid, i.e., 04-4-2016. Though, the refund amount was paid to the Appellant consequent upon the final order dated 08.05.2015 passed by the CESTAT, but the date of computation of the interest amount will commence from the date of cessation of three months of the original refund application, and not from the date, when the refund amount was finally paid.
We also observed that the issue in the present case regarding payment of interest on delayed refund amount is no more res integra in view of the judgment of Hon’ble Supreme Court delivered in the case of M/s. Ranbaxy Laboratories Ltd. Union of India, reported in 2011 (273) E.L.T. 3 (S.C.).
FULL TEXT OF THE CESTAT AHMEDABAD ORDER
All these appeals are directed against the common impugned Order-in-Appeal No. CCSA-Audit-SRT/VK-67 to 68/2018-19 dated. 31.12.2018 passed by the Pr. Commissioner (Audit /Appeals) GST & Central Excise, Audit, Surat whereby the appeals for claims of interest on refund amount are rejected.
2. Briefly the facts of the present case are that the central excise officers visited the factory premises of the Appellant and found that Appellant had wrongly availed the exemption Notification No. 214/86 CE dated. 25.03.1986 and Appellant were required to pay duty amounting to Rs. 77,99,763/- and Rs.19,25,540/- for such wrong availment. Accordingly, the appellant deposited the amount of Rs. 35,00,000/- and of Rs. 15,00,000/- and credited the same in PLA account for payment of duty. But on ascertaining sufficient balance in Cenvat account, they debited the duty amount from cenvat account. Subsequently, the appellant filed the refund claim for the amount of Rs. 35,00,000/- and Rs. 15,00,000/- deposited in their PLA account lying unutilized due to inverted duty structure. The said refund claims were rejected by the Jurisdictional authority vide Order-In-Original both Dated. 04.08.2008. Being aggrieved, appellant filed appeal before the Commissioner (Appeals), Vapi, who vide Order-In-Appeal dated 28.12.2007 upheld the impugned order. Against the said Order-In-Appeal appellant filed appeal before the CESTAT and vide final order dated 08.05.2015 tribunal set aside the impugned orders and held that the appellant is eligible for the refund of unutilized balance in PLA.
3. Consequent upon the Tribunal’s final order the appellant vide letter dated. 23.11.2015 requested the department to sanction the refund claims of Rs.35,00,000/- & 15,00,000/- along with interest. The Adjudicating authority sanctioned both the refund claims without interest and conditionally, subject to the outcome of the decision of Hon’ble High Court of Mumbai in respect of appeal filed by department against the Tribunal ‘s order No. A/1094110942/2015 dated 08.05.2015. Being aggrieved, the appellant preferred the appeals before the Commissioner (Appeals) who vide impugned order rejected the appeals. Hence, against the denial of interest on delayed sanction of refund, the appellant is before us.
4. Prakash Shah, Learned Counsel appearing on behalf of the appellant submits that undisputedly the refund claims were duly sanctioned by the adjudicating authority which was filed on 19.05.2005 and not on 23.11.2015 as claimed by the adjudicating authority in impugned refund orders. The said refund claim which was filed originally on 19.05.2005 was sanctioned on 04.04.2016. As per the provisions of Section 11BB of Central Excise Act, 1944 the department is under legal obligation to sanction the refund claim along with interest after the expiry of 3 months from the date of filing of the refund claim. He placed reliance on the following Judgments:-
- 2014(170)ELT 4 – J.K. Cement Works Vs. Assistant Comm.
- (ii)2005 (179)ELT A150 (SC)- Asst. Comm Vs. J.K. Cement Work.
- 2008 (229)ELT 498 (Bom) CCE Vs. Ballarpur Industries Ltd.
- 2009(235)ELT 129 (Tri. Ahmd.) Prime Automation (India) Pvt. Ltd.Vs. Commr. of ST., Ahmedabad.
- 2009(236) ELT 526 (Tri. Ahmd.) Commissioner of Central Excise Vs. Olympic Synthetics.
- 2011(273) ELT 3 (SC) -Ranbaxy Laboratories Ltd. Vs. Union of India
- 2013(289)ELT 429 (Guj) Shri Jagdamba Polymers Ltd. Vs. Union of India
- 2014 (305)ELT 396 (Bom) – Union of India Vs. Jindal Drugs Ltd.
- 2016 (334)ELT 133 (Tri. Ahmd.) – Tata Chemicals Ltd. Vs. Commissioner of C.Ex., Rajkot
4.1. He also submits that CBEC has issued Circular No. 130/41/95-CX dated 30.05.1995 and clarified that department is liable for payment of interest on various types of refund claims not processed within 3 months from the date of receipt of refund claim. The instructions provide in said circular for payment of interest on delayed sanction of refund claims also covers refund of PLA balance.
4.2. He further submits that the Appellant authority failed to consider that the Assistant Commissioner wrongly relied upon the provisions of relevant date as appearing in Section 11(B)(5)(B)(ec) which is applicable to the cases where refund claim is required to be filed for the first time on account of duty becomes refundable as a consequence of Judgment, decree, order or direction of appellant authority, appellate tribunal or any court. The said provision applicable where the refund of deposit amount becomes refundable after the judgment and refund claims is thereafter filed for the first time under Section 11B. The said provision is not applicable where the refund is already filed which was disputed by the department and subsequently sanctioned with delay.
4.3. He also submits that CBEC under their Circular No. 670/61/2002-CX dated 01.10.2002 has very categorically clarified that wherever refund claim is sanctioned beyond the three month of filing, then refund should be sanctioned with amount of interest payment.
5. On the other hand, Shri. Ghanshyam Soni, Learned Joint Commissioner (Authorized Representative) appearing on behalf of the Revenue reiterates the finding of the impugned order.
6. We have carefully considered the submissions made by both the sides and perused the records, we find that the limited issue involved is that from which date the appellant is entitled for interest on the sanctioned refund. As per the facts of the present case, we find that there is no dispute about the fact that the refund claim had been filed on 19.05.2005 and the same was sanctioned only vide order-in-original both dated 04.04.2016. We also noticed that in the present matter both the adjudicating authority considered the letter dated 23.11.2015 as refund claim application, whereas vide letter dated 23.11.2015 appellant only informed the Jurisdictional Deputy Commissioner that CESTAT has passed order in their favour and accordingly to sanction the refund amount along with interest.
7. The Section 11BB deals with interest on delayed refunds which reads as under :-
“11BB. Interest on delayed refunds. – If any duty ordered to be refunded under sub-section (2) of section 11B to any applicant is not refunded within three months from the date of receipt of application under sub-section (1) of that section, there shall be paid to that applicant interest at such rate (not below five per cent.) and not exceeding thirty per cent. per annum as is for the time being fixed (by the Central Government, by notification in the Official Gazette) 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. – Where any order of refund is made by the Commissioner (Appeals), Appellate Tribunal or any Court against an order of the Assistant Commissioner of Central Excise, under sub-section (2) of section 11B, the order passed by the Commissioner (Appeals), Appellate Tribunal (National Tax Tribunal) or, as the case may be, by the Court shall be deemed to be an order passed under the said subsection (2) for the purposes of this section.”
This section clearly stipulates that if any duty is ordered to be refunded under sub-section (2) of Section 11B of the Act to the applicant and the same is not refunded within three months from the date of receipt of such application under sub-section (1) of Section 11B of the Act, then the applicant would be entitled to interest. This interest would be payable immediately after the expiry of three months from the date of receipt of such application till the date of refund of the duty. In a nutshell, what this section stipulates is that, once an application for refund has been made and the same is granted within a period of three months of receipt of such application, there would be no liability to pay interest. However, if the refund is granted after the expiry of the period of three months from the date of receipt of the application, then interest would also be payable on the amount of refund granted, from the date immediately after the expiry of three months from the date of receipt of such application, till the date of refund.
8. As per the statutory mandate of Section 11BB of the Act the department is under legal obligation to sanction the refund claim along with interest after the expiry of 3 months from the date of filing of the refund claim. In the present matter the time limit for payment of the refund amount to the Appellant by the Central Excise authorities (without interest) expired on 1908-2005. Since, claimed amount was finally paid to the Appellant on 04.04.2016, in our considered view, the Appellant is entitled for the statutory interest from 20-8-2005 to the date when the refund was eventually paid, i.e., 04-4-2016. Though, the refund amount was paid to the Appellant consequent upon the final order dated 08.05.2015 passed by the CESTAT, but the date of computation of the interest amount will commence from the date of cessation of three months of the original refund application, and not from the date, when the refund amount was finally paid.
9. We also observed that the issue in the present case regarding payment of interest on delayed refund amount is no more res integra in view of the judgment of Hon’ble Supreme Court delivered in the case of M/s. Ranbaxy Laboratories Ltd. Union of India, reported in 2011 (273) E.L.T. 3 (S.C.). The relevant paragraph of the said judgment is extracted herein below:-
“9….. Section 11BB of the Act comes into play only after an order for refund has been made under Section 11B of the Act. Section 11BB of the Act lays down that in case any duty paid is found refundable and if the duty is not refunded within a period of three months from the date of receipt of the application to be submitted under sub-section (1) of Section 11B of the Act, then the applicant shall be paid interest at such rate, as may be fixed by the Central Government, on expiry of a period of three months from the date of receipt of the application. The Explanation appearing below Proviso to Section 11BB introduces a deeming fiction that where the order for refund of duty is not made by the Assistant Commissioner of Central Excise or Deputy Commissioner of Central Excise but by an Appellate Authority or the Court, then for the purpose of this Section the order made by such higher Appellate Authority or by the Court shall be deemed to be an order made under sub-section (2) of Section 11B of the Act. It is clear that the Explanation has nothing to do with the postponement of the date from which interest becomes payable under Section 11BB of the Act. Manifestly, interest under Section 11BB of the Act becomes payable, if on an expiry of a period of three months from the date of receipt of the application for refund, the amount claimed is still not refunded. Thus, the only interpretation of Section 11BB that can be arrived at is that interest under the said Section becomes payable on the expiry of a period of three months from the date of receipt of the application under sub-section (1) of Section 11B of the Act and that the said Explanation does not have any bearing or connection with the date from which interest under Section 11BB of the Act becomes payable.”
10. In view of the above discussion and findings which gets support from the statute, Board’s circulars and apex court’s judgment, the impugned order is not sustainable, hence the same is set aside and appeals filed by the appellant are allowed with consequential relief.
(Pronounced in the open court on 10.06.2022)
