Interest on delayed refund claim U/s. 11BB also applicable on refund of accumulated Cenvat credit

Interest on delayed payment of refund claim under Section 11BB of the Central Excise Act, 1944, also applicable on refund of accumulated Cenvat credit under Rule 5 of the Cenvat Credit Rules, 2004

Sterlite Industries Limited (the Appellant) filed a refund claim of Rs. 7,11,45,917/- on September 27, 2004 for accumulated credit under the provisions of Rule 5 of the Cenvat Credit Rules, 2004 (the Credit Rules) but the Appellant did not annex all the documents required for the purpose of processing the refund claim.Accordingly, the Appellant filed a revised refund claim of Rs. 7,13,28,821/- on December 8, 2005 out of which an amount of Rs. 6,45,83,460/- was sanctioned by the Adjudicating Authority.

Thereafter, the Appellant filed a refund claim of Rs. 49,39,393/- for interest on delayed refund under Section 11BB of the Central Excise Act, 1944 (“the Excise Act”) which was denied by the Adjudicating Authority.

The first Appellate Authority upheld the order of the Adjudicating Authority on the following grounds: –

• The delay in sanction of refund claim was due to non-furnishing of documents by the Appellant and not due to the Revenue.
• The Appellant’s refund was not filed vide Section 11B of the Excise Act and hence no interest under Section 11BB thereof is admissible.

Being aggrieved, the Appellant preferred an appeal to the Hon’ble CESTAT, Ahmedabad.

The Hon’ble CESTAT, Ahmedabad held that:

• It is apparent from the Order-In- Original dated March 9, 2006 that refund claim was decided under Rule 5 of the Credit Rules read with Notification No. 11/2002-CE (NT) dated March 1, 2002 (“the Notification”) and Section 11B of the Excise Act;
• Section 11B of the Excise Act has also been made applicable to the refund claim of Rule 5 of the Credit Rules as per Clause 6 of the Notification;
• It would be inappropriate to say that interest provisions of Section 11BB of the Excise Act not applicable to refunds under Rule 5 of the Credit Rules;
• As per the facts and circumstances of the case, date of filing of refund claim has been taken as September 27, 2004 to reject/ sanction the refund claim of the Appellant which was sanctioned on March 9, 2006;
• The Adjudicating Authority vide letter dated November 3, 2004 raised certain queries but did not return the refund claim filed by the Appellant. No efforts were made by the Department to reject the refund claim as unsubstantiated when the Appellant was not providing the required details/ documents.

Thus there was delay in sanctioning the refund claim of the Appellant and accordingly, interest on delayed refund is payable to the Appellant under Section 11BB of the Excise Act.

Our Comments: Even, the recent Notification No. 27/2012-CE (NT) dated June 18, 2012, allowing refund under Rule 5 of the Credit Rules, contains a clause no. 3(b) which states that “The application in the Form A along with the documents specified therein and enclosures relating to the quarter for which refund is being claimed shall be filed by the claimant, before the expiry of the period specified in section 11B of the Central Excise Act, 1944 (1 of 1944)”.

Hence, in lieu of existent provisions, the assessee can claim Interest on delayed payment of refund claim under Section 11BB of the Excise Act, also as applicable on refund of accumulated Cenvat credit under Rule 5 of the Credit Rules.