Central Excise - Refund - Interest on delayed refund - Section 11BB - Interest payable if refund not paid within three months from date of application: SC
THE reluctance of the officers under CBEC to pay interest on delayed refunds is well known.
Here is a case in which the assessee was taken all the way to the Supreme Court and had to wait for more than 15 years to get the interest on delayed refund.
There was a dispute between the assessee and the Department on classification of the goods manufactured by the assessee, which the assessee ultimately won in the Supreme Court. After winning in the Supreme Court, the assessee filed a refund claim of the duty paid during the disputed period. The refund claim was filed on 25th August 1999 and the refund was granted on 15.11.2000. The assessee claimed interest for the period of delay in granting the refund, which was obviously rejected.
The assessee filed a writ in the High Court.
The High Court observed,
From a bare reading of the provisions of Section 11BB of the Act, we find that the legislature by the aforesaid provision has cast a duty upon the adjudicating authority to decide the claim for refund immediately within three months failing which the liability for interest start running after excluding the period of three months from the date of the application. Admittedly, in the present case, it is not in dispute that the claim for refund was made on 25th August, 1999 whereas the order for refund has been passed on 16th November, 2000. Under the provision of Section 11BB of the Act, interest start running after three months from the date of the application irrespective of the fact as to whether the order for refund has been made subsequent to the period of three months. As in the present case, the order for refund has been made on 16th November, 2000 i.e. much after the expiry of period of three months from the date of making the application, therefore, the respondents are liable to pay interest at the specified rate therein. Liability for payment of interest is statutory and, therefore, it was the bounden duty of the Assistant Commissioner of Central Excise, Division-I, Ghaziabad to also pay interest from 26th November, 1999 to 16th November, 2000 at the rate specified under Section 11BB of the Act.
The High Court ordered payment of interest and a cost of Rs. 10,000.
The Department was not impressed and took the matter in appeal to the Supreme Court.
The Supreme Court last week dismissed the Revenue appeal and confirmed the order of the High Court.
The interest that was to be paid in 2000 will now be hopefully paid in 2016, after 15 years. Who will pay interest (on the interest payable) for these 15 years? Will the assessee get that interest on the interest withheld by the Department?
Was the officer who denied the interest making or marring his department?
There is a belief among many officers that if they delay the grant of refund by raising objections or issue of Show Cause Notices, they are not liable to pay interest. Now, it is clarified that refund has to be given within three months from the date of application, and if not paid, the department cannot escape the liability of interest.
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