We are sharing with you an important judgement of the Hon’ble Gujarat High Court in the case of Hindustan Coca-Cola Beverages (P.) Ltd. versus Union of India [(2013) 37 taxmann 329 (Gujarat)] on following issue:


Whether the assessee is entitled to claim interest if the Department unjustifiably withholds rightfully earned Cenvat credit?

Facts & Background:

M/s. Britco Foods Company Ltd. (“the Amalgamating co.”) merged with M/s Hindustan Coca-Cola Beverages Pvt. Ltd. (“the Appellant”) in terms of a scheme of arrangement under Section 391 and 394 of the Companies Act, 1956 duly sanctioned by the High Court of Delhi.

An application was made to the Commissioner for transfer of unutilized Cenvat Credit of the Amalgamating co in terms of Rule 10 of the Cenvat Credit Rules, 2004, which reads as under:

“10. Transfer of CENVAT credit.-

(1) If a manufacturer of the final products shifts his factory to another site or the factory is transferred on account of change in ownership or on account of sale, merger, amalgamation, lease or transfer of the factory to a joint venture with the specific provision for transfer of liabilities of such factory, then, the manufacturer shall be allowed to transfer the CENVAT credit lying unutilized in his accounts to such transferred, sold, merged, leased or amalgamated factory……………..”

However, there was delay in allowing the transfer of the Cenvat credit from the date of application till the date of grant of such credit.

The Appellant filed writ petition in which an order was passed directing the Commissioner to allow the transfer of Cenvat Credit. The Commissioner allowed transfer of Cenvat Credit but no order was made regarding the claim of interest.

The Appellant made a representation to the Commissioner postulating its claim of interest on delay in transferring the Cenvat Credit. In response, the Commissioner issued a show cause notice asking the Appellant to show cause as to why the claim of interest should not be rejected since there was no such provision in law. The Appellant replied to the said show cause notice. Thereafter, the Commissioner passed the Order in Original and declined to pay any interest on the premise that there is no statutory provision enabling the Department to pay such interest to the Appellant.

The Appellant again filed writ petition before the Hon’ble Gujarat High Court wherein the Appellant claimed interest on delayed transfer of credit from the date of application till the date for grant of such Cenvat credit, which was denied by the Department citing absence of any provision in this behalf.


It was held by the Hon’ble High Court that the Department cannot be permitted to unjustly hold on the Appellant’s money without any interest, as it would amount to benefiting the Department from its own wrong.

The Appellant cited various judgments in support of his contention that even in absence of any statutory provision, interest on refund is automatic and has to be granted on commercial principles. The Hon’ble High Court placed reliance on the decision of the Hon’ble Supreme Court in the case of Sandvik Asia Ltd. v. CIT [(2006) 280 ITR 643/150 Taxman 591 (SC)]., wherein the Hon’ble Apex Court held that though there was no statutory provision to pay interest on delayed payment of interest but the assessee would be entitled to be compensated by way of interest on interest.

Accordingly, the Hon’ble Gujarat High Court set aside the order of the Commissioner disentitling the Appellant of the interest amount and directed the Department to pay the same to the Appellant.

Bimal Jain
FCA, FCS, LLB, B.Com (Hons)
Mobile: +91 9810604563
E-mail: [email protected]  

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September 2021