Lavino Kapur Cotton Pvt. Ltd. v. The Commissioner of CGST

2 Since the issue involved is common in all the appeals, for the purpose of facility of reference, facts of Central Excise Appeal No.121 of 2019 are being referred to.

3 The appeals were admitted on the following substantial question of law: “Whether the order passed by Appellate Tribunal, CESTAT, holding that the appellate company is entitled to interest u/s. 11BB of the Act only after three months of the fling of refund applications after the Tribunal Order granting refund is contrary to the decision of the Supreme court in the case of Ranbaxy Laboratories Ltd. Vs. UoI 2011-TIOL-105- SC-CX wherein the Supreme Court held that the interest is to be granted from the expiry of three months from the date of fling of the initial refund claimed and not from the date of the order of the authority fnally granting refund and as such bad in law?” Briefy stated the material facts are as under:

4 The Appellant fled four refund applications for refund of duty under the provision of Rule 5 of the CENVAT Credit Rules, 2004, amounting to Rs.59.35,217/- on various dates in 2005, 2006 and

5 The adjudicating authority rejected the refund claims of the Appellant, however, fnally the same were allowed by the Customs, Excise and Service Tax Appellate Tribunal (“CESTAT”) by virtue of its Order dated 10 February 2016.

6 After the Order of tribunal was passed, the Assistant Commissioner of Central Excise gave refund of an amount of Rs.59,35,217/- to the Appellant in June 2016. However, the claim of the Appellant for grant of interest under Section 11BB of the Central Excise Act, 1944 was rejected. For facility of reference, Section 11B and Section 11BB are reproduced as under: Section 11B. Claim for refund of duty. (1) Any person claiming refund of any duty of excise may make an application for refund of such duty to the Assistant Collector of Central Excise before the expiry of six months 1 from the relevant date 4 in such form as may be prescribed and the application shall be accompanied by such documentary or other evidence (including the documents referred to in section 12A) as the applicant may furnish to establish that the amount of duty of excise in relation to which such refund is claimed was collected from, or paid by, him and the incidence of such duty had not been passed on by him to any other person: Provided that where an application for refund has been made before the commencement of the Central Excises and Customs Laws (Amendment) Act, 1991, such application shall be deemed to have been made under this sub- section as amended by the said Act and the same shall be dealt with in accordance with the provisions of subsection (2) as substituted by that Act]: 4 Provided further that] the limitation of six months shall not apply where any duty has been paid under protest. (2) if, on receipt of any such application, the Assistant Col- lector of Central Excise is satisfed that the whole or any part of the duty of excise paid by the applicant is refundable, he may make an order accordingly and the amount so determined shall be credited to the Fund: Provided that the amount of duty of excise as determined by the Assistant Collector of Central Excise under the foregoing provisions of this sub- section shall, instead of being credited to the Fund, be paid to the applicant, if such amount is, relatable to-- (a) rebate of duty of excise on excisable goods exported out of India or, on excisable materials used in the manufacture of goods which are exported out of India; (b) unspent advance deposits lying in balance in the applicant' s account current maintained with the Collector of Central Excise;

(c) refund of credit of duty paid on excisable goods used as inputs in accordance with the rules made, or any notifcation issued, under this Act;

(d) the duty of excise paid by the manufacturer, if he had not passed on the incidence of such duty to any other person; (e) the duty of excise borne by the buyer, if he had not passed on the incidence of such duty to any other person; (f) the duty of excise borne by any other such class of applicants as the Central Government may, by notifcation in the Offcial Gazette, specify: Provided further that no notifcation under clause (f) of the frst proviso shall be issued unless in the opinion of the Central Government the incidence of duty has not been passed on by the persons concerned to any other person. Section 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, 2[not below fve per cent. and not exceeding thirty per cent. per annum as is for the time being fxed 3[by the Central Government, by notifcation in the Offcial 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: Provided where any duty ordered to be refunded under sub-section (2) of section 11B in respect of an application under sub-section (1) of that section made before the date on which the Finance Bill, 1995 receives the assent of the President, is not refunded within three months from such date, there shall be paid to the applicant interest under this section from the date immediately after three months from such date, till the date of refund of such duty. Explanation.—Where any order of refund is made by the Commissioner (Appeals). Appellate Tribunal 4[, National Tax Tribunal] or any Court against an order of the Assistant Commissioner of Central Excise, under subsection (2) of section 11B, the order passed by the Commissioner (Appeals), Appellate Tribunal or, as the case may be, by the Court shall be deemed to be an order passed under the said sub-section (2) for the purposes of this section.]

7 An appeal was preferred by the Appellant before the Commissioner of Central Excise (Appeals), who vide its Order dated 24 April 2017 rejected the claim of the Appellant for grant of interest under Section 11BB on the delayed refund of Rs.59,35,217/-.

8 The matter ultimately reached the Appellate Tribunal in Appeal by the Appellant, who by virtue of its Order impugned held that the Appellant was entitled to interest on the amount ordered to be refunded. The tribunal held that the right to refund in favour of the Appellant accrued in terms of the Order of the Tribunal which was passed on on 10 February 2016 and that the right to interest in terms of Section 11BB, in favour of the Appellant would accrue only if the refund has not been made within three months of the fling of the application in terms of such an Order.

9 The tribunal, therefore, proceeded to remand the matter to examine whether the refund applications were fled in terms of the Order dated 10 February 2016 and whether such refund applications were disposed of within three months thereof. It proceeded to Order that in the event there was a delay in refund beyond three months, the Appellant would be entitled to interest and not otherwise. It further went on to hold that the Appellant was not entitled to interest merely on fling an applications for refund without there being an Order under Section 11B(2) of Central Excise Act, 1944.

10 Mr. Shroff, learned Senior Advocate appearing for the Appellant, vehemently, urged that the Tribunal has committed a gross error in not appreciating correctly the bare provisions of Section 11 as also Sections 11B and 11BB and further urged that the tribunal had failed to appreciate and follow the Apex Court judgement in the case of Ranbaxy Laboratories Limited Vs. Union of India and Others[1], even when the said judgement was cited and noticed by the Appellant, but applied wrongly.

11 Mr. Walve, learned Counsel for the Respondent, on the otherhand, reiterated the view expressed in the the Order impugned passed by the tribunal.

12 We have heard learned Counsel for the parties.

13 The question which arises for our consideration is whether the liability of the revenue to pay interest under Section 11BB of the Act commences from the date of expiry of three months from the date of receipt of the application for refund under Section 11B(1) of the Act or the date on which the Order of refund is made ?

14 The date of fling of application for refund before the Authority is not in dispute. Assuming that the Assistant Commissioner of Central Excise, in the present case, had proceeded to accept the claim of the Appellant for refund and proceeded to pass an Order in terms of Section 11B(2) of the Act, then in case the amount was not refunded despite such an Order, the Appellant would be entitled to interest on the delayed payment of the refund 1 (2011) 10 Supreme Court Cases 292 after the expiry of three months from the date of such an Order. Section 11B, therefore, does not at all envisage an application tobe fled seeking refund. The only application, which Section 11B envisages is an application for refund in terms of Section 11B(1) and the only Order that the said Section 11B envisages is an Order under Section 11B(2), where if satisfed, the Assistant Commissioner of Central Excise or Deputy Commissioner may make an Order for refund of the whole or any part of the duty of excise and interest if any paid on such duty paid by the Appellant.