Interest is payable in case of inordinate delay in sanctioning rebate claim even if assessee did not challenge Order sanctioning refund without interest

Rajan Overseas Pvt. Ltd. (the Petitioner) was engaged in the manufacture and export of stainless steel cutlery and utensils (Impugned goods or final products). Since, the Impugned goods were exempted from the payment of the Central Excise Duty vide Notification No.10/2003-CE dated March 1, 2003, the Petitioner filed 16 rebate claims under Section 11B of the Central Excise Act, 1944 (the Excise Act) read with Rule 18 of the Central Excise Rules, 2002 (the Excise Rules), claiming refund of an aggregate amount of Rs.16,17,527/- of the Additional Duty of Customs or Countervailing Duty (“CVD”), paid on the raw materials imported and used in or in relation to the manufacture of the final products.

The Deputy Commissioner, Central Excise sanctioned rebate claims of Rs. 7,29,636/- and disallowed the rebate claims of Rs. 8,80,332/- on the ground that the CVD levied under Section 3 of the Customs Tariff Act, 1975 was not the duty in respect of which rebate was admissible under Rule 18 of the Excise Rules. Later, rebate claims of Rs. 8,80,332/- was sanctioned in a Revisionary Order passed by the Joint Secretary (Revision Applications), Government of India dated June 13, 2012 (“Revisionary Order”).

Thereafter, the Petitioner filed an application dated October 15, 2013 seeking interest at the rate of 8% p.a. or above, for the period the rebate claims were pending with the Authorities, which were rejected by the Department, directing the Petitioner to take appropriate legal course to process the claim of interest. Aggrieved by this rejection, the Petitioner filed an appeal before the Commissioner (Appeals), who dismissed the application on the ground the Petitioner, had not challenged the Revisionary Order, whereby refund for an amount of Rs. 8, 80,332/- was sanctioned without interest. Aggrieved by Order of the Commissioner (Appeals), the Petitioner filed the writ petition before the Hon’ble High Court of Delhi.

The Hon’ble High Court of Delhi observed that there was inordinate delay in allowing the rebate claims filed by the Petitioner considering that the raw materials were imported almost eight years ago. Further, relying on the common order dated September 17, 2012 passed by the High Court in WP(C) No.3696/2011 and in WP(C) No.3215/2011, wherein similar issue was dealt, the Hon’ble High Court granted interest at 8% p.a. to the Petitioner on delayed refund from expiry of 3 months from date when claim was first rejected by the Adjudicating Authority.