2025 (7) TMI 478 - AT - Central Excise

Entitlement for the interest on the amount of refund claim as has already been sanctioned to the appellant - Section 11BB of Central Excise Act - HELD THAT - The refund claim of the appellant as was filed on 06.09.2017 was with respect to refund of unutilized CENVAT. The final order of this Tribunal in M/S BHARAT HEAVY ELECTRICALS LTD. (EXCISE TAXATION DIVISION) VERSUS COMMISSIONER CENTRAL GOODS SERVICE TAX CENTRAL EXCISE CUSTOMS BHOPAL (MADHYA PRADESH) 2019 (4) TMI 1896 - CESTAT NEW DELHI has subsequently held appellant eligible for the cash refund of the cesses lying as Cenvat credit balance as on 30.06.2017 in their accounts. Though the same was proposed to be rejected vide the impugned show cause notice. However the order in original as passed in this appeal had sanctioned and disbursed the amount of refund claim amounting to Rs. 1, 56, 27, 241/- but without any interest. It is further observed that Commissioner (Appeals) has rejected the entitlement of the appellant to have interest on the said sanctioned amount only on the ground that the issue is sub-judiced before the Hon ble High Court Madhya Pradesh. It has been brought to notice that the said matter stands already disposed of as being dismissed as withdrawn. It stands clear that the very basis of the order of Commissioner (Appeals) is no more in existence. The Notification dated 12.09.2003 has also been perused. As per Section 11BB the statute itself entitles the assessee to have interest on the amount refunded in case the said amount is not sanctioned within three months of the refund claim - In the present case the refund application was of 06.09.2017 and the order sanctioning the same is dated 23.02.2021 apparently the order of sanction is much beyond the said period of three months. This is sufficient to conclude that the appellant is entitled for interest on the amount of refund claim. However with effect from the date on which the three months from the date of refund expires till the date of disbursement thereof. Coming to rate of interest of the said amount it is observed that Section 11BB has given a range of such rate which should not be below 5% and should not be exceeding 30% subject to a notification in the official gazette. The notification dated 12.09.2003 has fixed the said rate at 6%. The appellant entitled for the interest for the period as already mentioned above @ 6% - appeal allowed.

Summary

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered by the Tribunal in this appeal are:

(a) Whether the appellant is entitled to interest under Section 11BB of the Central Excise Act on the amount of refund sanctioned after a delay exceeding three months from the date of receipt of the refund application.

(b) Whether the order of the Commissioner (Appeals) denying interest on the sanctioned refund amount due to pendency of a writ petition before the Hon'ble High Court remains valid in light of the subsequent disposal of that writ petition as withdrawn.

(c) The applicability and interpretation of Section 11BB of the Central Excise Act and the relevant notification fixing the rate of interest on delayed refunds.

(d) The relevance of various judicial precedents and departmental contentions challenging the entitlement to refund and interest thereon, including the applicability of judgments in cases such as Eicher Motors, Banswara Syntex Ltd., and Sutherland Global Services Pvt. Ltd.

2. ISSUE-WISE DETAILED ANALYSIS

Issue (a): Entitlement to Interest under Section 11BB on Delayed Refund

Relevant Legal Framework and Precedents: Section 11BB of the Central Excise Act mandates payment of interest on any duty ordered to be refunded if the refund is not made within three months of receipt of the refund application. The interest rate is to be fixed by the Board within a prescribed range (not below 10% and not exceeding 30%). Notification No. 67/2003 dated 12.09.2003 fixes the rate at 6%. The Explanation to Section 11BB clarifies that orders passed by appellate authorities or courts are deemed to be orders under sub-section (2) of Section 11B for the purposes of interest calculation.

Court's Interpretation and Reasoning: The Tribunal observed that the refund application was filed on 06.09.2017, but the refund was sanctioned only on 23.02.2021, which is well beyond the three-month period prescribed under Section 11BB. This delay entitles the appellant to interest on the refund amount from the expiry of three months after the refund application till the date of actual refund.

Key Evidence and Findings: The refund claim amounting to Rs. 1,56,27,241/- was sanctioned and disbursed without interest. The Tribunal noted the statutory mandate in Section 11BB and the delay in sanctioning the refund.

Application of Law to Facts: Applying Section 11BB and the notification fixing the interest rate at 6%, the Tribunal concluded that the appellant is entitled to interest @ 6% per annum for the period starting from the expiry of three months after the refund claim till the date of disbursement.

Treatment of Competing Arguments: The Revenue conceded the applicability of Section 11BB and the entitlement to interest but did not dispute the rate fixed by the notification. The appellant relied on judicial precedent from the Delhi High Court affirming entitlement to interest. The Tribunal found no merit in the Revenue's contention that interest should be denied due to pendency of a writ petition, which had been dismissed as withdrawn.

Conclusion: The appellant is entitled to interest under Section 11BB at 6% per annum on the sanctioned refund amount for the delayed period.

Issue (b): Validity of Commissioner (Appeals) Order Denying Interest Due to Pendency of Writ Petition

Relevant Legal Framework and Precedents: The Commissioner (Appeals) had dismissed the appellant's claim for interest on the ground that the issue was sub-judice before the Hon'ble High Court of Madhya Pradesh. The Tribunal examined whether this ground remains valid after the writ petition was dismissed as withdrawn.

Court's Interpretation and Reasoning: The Tribunal noted that the writ petition, which formed the basis for the Commissioner (Appeals) order denying interest, had been disposed of as withdrawn on 23.07.2025. Thus, the foundation of the Commissioner (Appeals) order no longer exists.

Key Evidence and Findings: The appellant's counsel produced the order of dismissal of the writ petition as withdrawn. The Tribunal relied on this fact to invalidate the Commissioner (Appeals) reasoning.

Application of Law to Facts: Since the writ petition was no longer pending, the Tribunal held that the appellant's entitlement to interest cannot be denied on the ground of sub-judice status.

Treatment of Competing Arguments: The Revenue did not dispute the dismissal of the writ petition but maintained that the Commissioner (Appeals) order was otherwise valid. The Tribunal rejected this contention in light of the writ petition's disposal.

Conclusion: The denial of interest by the Commissioner (Appeals) on the ground of pendency of the writ petition is unsustainable.

Issue (c): Applicability and Interpretation of Section 11BB and Relevant Notification

Relevant Legal Framework and Precedents: Section 11BB prescribes interest payment on delayed refunds, with a specified range of interest rates. The Notification No. 67/2003 fixes the rate at 6%. The Explanation clarifies that appellate or judicial orders confirming refund entitle the claimant to interest.

Court's Interpretation and Reasoning: The Tribunal emphasized that the statute itself entitles the appellant to interest when refund is delayed beyond three months. The notification sets the rate at 6%, which is binding for the period in question.

Key Evidence and Findings: The Tribunal examined the statutory language, the notification, and the timeline of the refund application and sanction.

Application of Law to Facts: The Tribunal applied the statutory provisions and notification to conclude the appellant's entitlement to interest at 6% per annum for the delayed period.

Treatment of Competing Arguments: The appellant relied on judicial precedents affirming interest entitlement. The Revenue conceded the applicability of Section 11BB and the rate fixed by notification but initially resisted interest payment due to procedural grounds.

Conclusion: Section 11BB and the notification mandate payment of interest at 6% per annum for delayed refunds, which applies to the appellant's case.

Issue (d): Relevance of Judicial Precedents and Departmental Contentions on Refund and Interest

Relevant Legal Framework and Precedents: The Revenue had raised multiple grounds challenging the refund claim, citing judgments such as Eicher Motors, Banswara Syntex Ltd., and Sutherland Global Services Pvt. Ltd., which dealt with the refundability of CENVAT credit balances and cess balances.

Court's Interpretation and Reasoning: The Tribunal noted that the final order of this Tribunal dated 26.04.2019 had already held the appellant eligible for cash refund of the CENVAT credit balance as on 30.06.2017. The departmental appeal against this order was dismissed as withdrawn by the Hon'ble High Court, thereby settling the entitlement to refund.

Key Evidence and Findings: The Tribunal reviewed the procedural history and judicial pronouncements, concluding that the appellant's refund claim was valid and had been sanctioned.

Application of Law to Facts: Since the refund claim was sanctioned and the departmental challenge was withdrawn, the appellant's entitlement to refund and consequently to interest under Section 11BB stands established.

Treatment of Competing Arguments: The Revenue's reliance on conflicting judicial precedents was rendered moot by the finality of the Tribunal's order and the withdrawal of departmental appeal.

Conclusion: The appellant's refund claim and entitlement to interest are upheld, and prior departmental objections have been effectively resolved.

3. SIGNIFICANT HOLDINGS

The Tribunal held:

"The statute itself entitles the assessee to have interest on the amount refunded in case the said amount is not sanctioned within three months of the refund claim."

"The refund application was of 06.09.2017 and the order sanctioning the same is dated 23.02.2021 apparently the order of sanction is much beyond the said period of three months. This is sufficient for me to conclude that the appellant is entitled for interest on the amount of refund claim."

"Section 11BB has given a range of such rate which should not be below 5% and should not be exceeding 30% subject to a notification in the official gazette. The notification dated 12.09.2003 has fixed the said rate at 6%. Resultantly, I hold appellant entitled for the interest for the period as already mentioned above @ 6%."

"The denial of interest by the Commissioner (Appeals) on the ground that the issue is sub-judice before the Hon'ble High Court is no longer valid as the said matter stands disposed of being dismissed as withdrawn."

The Tribunal allowed the appeal, directing payment of interest at 6% per annum on the sanctioned refund amount from the expiry of three months after the refund application till the date of disbursement.