Waiver of interest by assessee does not detract Revenue’s statutory obligation to grant interest on belated refund
We are sharing with you an important judgement of the Hon’ble High Court of Allahabad, in the case of Shree Balaji Aromatics (P.) Ltd. Vs. Union of India [(2014) 46 taxmann.com 5 (Allahabad)] on following issue:
Whether waiver of interest on delayed refund by the assessee detracts the statutory liability of the Revenue to pay interest on such delayed refund under Section 11BB of the Central Excise Act, 1944 (“the Excise Act”)?
Facts & Background:
Shree Balaji Aromatics (P.) Ltd. (“the Petitioner” or “the Company”) filed certain refund claims in the years 2005, 2006 and 2007. In the month of April 2007, the Petitioner on the verbal undertaking given by the Department for expeditious disposal of refund claims, wrote a letter to the Department informing that they will not claim any interest on belated refund. The said refund claims were allowed without any interest vide order dated July 8, 2007. Later, the Petitioner filed writ petition before the Hon’ble High Court of Allahabad seeking interest on belated refunds under Section 11BB of the Excise Act.
Relevant extract of Section 11BB of the Excise Act has been reproduced hereunder for the ease of reference:
“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, not below five per cent and not exceeding thirty per cent per annum as is for the time being fixed by the Central Government, by notification in the official 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:………….”
The Department contended that the Petitioner’s letter for not claiming the interest tantamounts to waiver of his right to claim the interest and therefore, they are not entitled to claim interest.
However, the Petitioner relying upon the Circular No. 670/61/2002-CX, dated October 1, 2002 (“the Circular”) and decision of the Apex Court in the case of Ranbaxy Laboratories Ltd. Vs. Union of India [(2011) 33 STT 326] (“the Ranbaxy case”) submitted that the Company was entitled to interest on refund claims in terms of Section 11BB of the Excise Act even though they had written a letter for not claiming the interest as the provisions of Section 11BB of the Excise Act are attracted automatically for any refund sanctioned beyond a period of three months. Further, the Petitioner also claimed interest on interest on account of illegal withholding of the amount of interest.
The Hon’ble High Court of Allahabad relying upon the Circular and the Ranbaxy case, held that use of words "there shall be paid to the applicant” in Section 11BB of the Excise Act reveals that payment of interest on belated refund is automatic and not dependent upon claim by assessee. If refund is not paid within 3 months from date of receipt of application, authority is under obligation to pay the interest.
It was further held by the Hon’ble Allahabad High Court that interest on delayed refund under Section 11BB of the Excise Act is not discretionary, it is statutory and waiver of interest by the assessee has no relevance and interest cannot be denied on said ground.
Therefore, the Hon’ble High court of Allahabad rejected the contention of the Department and decided the case in favour of the assessee/ Petitioner. However, the Hon’ble High Court rejected the Petitioner’s demand of interest on interest.
Point to note:
Although the interest provision contained under Section 11BB of the Excise Act is very clear and unconditional depicting the intention of the Legislature to provide speedy disposal of refund claims, same matter has been settled number of times by the Courts strictly providing for payment of interest on refunds delayed beyond the period of 3 months calculated from the date of application:
- Commissioner of Central Excise, Pune-II Vs. Sulaki Chemicals (P.) Ltd. [(2014) 45 taxmann.com 525 (Bombay)]
- Rishabh Velveleen Ltd Vs. CESTAT [(2014) 45 taxmann.com 540 (Uttarakhand)]
- Shroff United Chemicals Limited Vs. Union Of India [2011 (24) S.T.R. 17 (Bom.)];
- Union of India Vs. Swaraj Mazda Ltd. [2010 (253) E.L.T. A19 (S.C.)];
- Amalgamated Plantations (P) Ltd. Vs. Union Of India [2013 (296) E.L.T. 13 (Gau.)]
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