Interest on Refund:Ranbaxy Case

RECENT CASE OF RANBAXY LABS LMITED v. UNION OF INDIA AND OTHERS[1]: DATE FOR DETERMINATION OF INTEREST ON REFUND UNDER S. 11-BB OF CENTRAL EXCISE ACT, 1944

INTRODUCTION

Under the Central Excise Act, 1944, an assessee can make a claim for refund of the duty. Section 11-B of the Central Excise Act makes provision for the claim for refund of duty. This Act also makes provision of interest on the refunds which are delayed. Section 11-BB of the Act makes a provision that if a duty which is ordered to be refunded under Section 11-B (2) is not refunded within three months from the date of receipt of an application, interest shall be paid to the assessee.

The recent case of Ranbaxy Labs Limited v. Union of India and Others was decided on 21^st October 2011 by Hon’ble Justices D.K. Jain and Anil Dave and deals with the date from which the liability to pay the interest on non-payment of refund is to be calculated. A 2-Judge Bench of Supreme Court makes its decision while placing reliance on JK Cement Works case.  Prior to this decision, High Court of Delhi has made its decision while relying on the case of Shreeji Colour Chemical Industries.[2]

While the Excise Department insisted on a different date for the date from which the calculation of interest for non-payment of refund is to be made, appellants insisted that from the date when application is made for refund, after the expiry of three months from such date, interest becomes payable.

NO POSTPONEMENT BY EXPLANATION TO SECTION 11-BB

It was said by the Excise Department that provisions of Section 11-BB are not attracted because no refunds were sanctioned under Section 11-B of the Act. Application of Section 11-BB requires sanction of refunds under Section 11-B. Since the order was sanctioned within three months of passing of orders by the appellate authority, the question of payment of interest under the said section does not come into picture.

Supreme Court in paragraph 12 says:

“It was manifest from the afore extracted provisions that Section 11 – BB of the Act comes into play only after an order of refund has been made under section 11-B of the Act. Section 11-BB of the Act lays down that in case any duty paid is found refundable and if the duty is not refunded within a period of three months from the date of receipt of application to be submitted under sub- section (1) of Section 11-B of the Act, then the applicant shall be paid interest at such rate, as may be fixed by the Central Government, on expiry of a period of three months from the date of receipt of application. Explanation appearing below the proviso to Section 11-BB introduces a deeming fiction that where the order for refund of duty is not made by Assistant Commissioner of Central Excise or Deputy Commissioner of Central Excise but by an appellate authority or the court, then for the purposes of this Section order made by such higher appellate authority or by court shall be deemed to be an order made under sub-section (2) of Section 11-B of the Act.”

The explanation was observed to be clear and found to have nothing to do with the postponement of the date from which interest becomes payable under Section 11-BB of the Act.

RE-EMPHASISING STRICT INTERPRETATION OF FISCAL STATUTES

Supreme Court in paragraph 14 of its decision lays down the accepted principle of strict interpretation of a fiscal statute which has already been approved by Supreme Court in Ajmera Housing Corporation v. CIT. [3]

Supreme Court stated that the strict construction of a fiscal legislation is a well-settled proposition of law and one has to look merely at what is said in the relevant provision, there is nothing to be read in; nothing to be implied and there is no room for any intendment as stated in Cape Brandy Syndicate v. Inland Revenue Commissioner.[4]

DATE OF APPLICATION: RELEVANT DATE

Supreme Court agreed with the contention of the assessee that with the decision of the Apex court in UP Twiga Fiber Glass Limited[5] the issue stands concluded. In that case while Special Leave Petition by the Revenue was dismissed, the decision of Allahabad High Court got its  seal of approval by this court at page A-27:

The law laid down by the Rajasthan High Court in JK Cement Works v. Commissioner of Central Excise and Customs[6] vide para 33(ELT p.11) says:

It is clear that the relevant date for the purposes of determining the liability to pay interest is not the one determined under sub-section (2) of Section 11-B to refund the amount to applicant and not to be transferred to Consumer Welfare Fund but the relevant date is to be determined with reference to the date of application laying claim to refund.

The non-payment of the refund to applicant claimant within three months from the date of such application, or, in the case governed by the proviso to Section 11-BB, non-payment within three months from the date of the commencement of Section 11-BB brings in the starting point of liability to pay the interest, notwithstanding the date on which decision has been rendered by competent authority as to whether the amount is to be transferred to Welfare Fund or to be paid to the applicant needs no interference.

DISTINGUISHING Shreeji Colour Chemical Industries

Before the matter came up for the consideration of Hon’ble Supreme Court, Delhi High Court while making its decision placed its reliance on the case of Shreeji Colour Chemical Industries.[7]

It was urged by the assessee that Shreeji Colour Chemical Industries clearly holds that an assessee is entitled to interest under the said section after the expiry of three months from the date of receipt of application for payment of refund.

It was quite clear and lucid from the bare reading of the decision that in so far as reckoning of the period for the purposes of payment of interest under Section 11-BB is concerned, emphasis has been laid on the date of receipt of application for refund.

In Shreeji Colour Chemical Industries, it was noted that the assessee filed before the Assistant Commissioner an application requesting for the refund on 12 January 2004 before the Assistant Commissioner. In that situation, the Court directed the payment of statutory interest under said Section from 12-4-2004, i.e. after the expiry of period of three months from the date of receipt of application. Supreme Court felt that the reliance by the Excise Department is perhaps misplaced. So this case was felt to be of no avail to the Revenue.

CONCLUSION

Reliance of High Court of Delhi on Shreeji case, as rightly pointed out by the petitioner, was not proper in the present fact situations. The case is also another stamp of nod given by the Supreme Court to J.K. Cement Works’ case. Clearly, the decision makes it clear once again that there must be strict interpretation of fiscal statutes there being no room for intendment. Supreme Court’s emphasis on this principle approved the well established principles of interpretation of taxing statutes.

[1] (2011) 10 SCC 292

VISHAL MISHRA