The main legal point established in the judgment is that interest on delayed refunds is a statutory liability under Section 11BB of the Central Excise Act, 1944, and becomes payable if the duty ordered to be refunded is not refunded within three months from the date of receipt of the application.

JUDGMENT :

K.R. SHRIRAM, J.

1. Petitioner is engaged in the business of providing Information Technology enabled Services to its group entities located outside India. Petitioner in order to provide the output services, receives various input services and avails the credit for service tax paid thereat under Rule 3 of the CENVAT Credit Rules, 2004 [‘Credit Rules’]. Petitioner’s services are exported without payment of service tax which results in accumulation of CENVAT credit of service tax paid on input services.

2. It is petitioner’s case that in terms of Rule 5 of the Credit Rules, petitioner, as provider of the output service, that are exported, is entitled to claim refund of the credit of the service tax paid on input services that remained unutilised. There are notifications issued in that regard under Rule 5 of the Credit Rules for claiming of refund of unutilised credit.

3. Petitioner filed eight refund applications as detailed in the petition. Admittedly these refund applications have been processed and refund has been granted. It is petitioner’s case that as per provisions of Section 11BB of the Central Excise Act, 1944 [“The Act”] if any duty ordered to be refunded is not refunded within three months from the date of receipt of the application there shall be paid to that applicant interest at such rate, not below five percent and not exceeding thirty percent per annum that would be fixed for the time being by the Central Government, by notification in the Official Gazette. Such interest will become payable 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.

4. We are informed that current rate fixed by the Central Government is 6% per annum.

5. Petitioner is only seeking interest on the refund amount because it is petitioner’s case that refund was issued after the expiry of three months.

6. Shri Deshmukh appearing for respondent did not dispute any of the facts mentioned above, but according to Shri Deshmukh interest was not processed because there were certain defects in the application which defects have been subsequently rectified.

7. Shri Deshmukh, relying upon an affidavit in reply of one Rohitkumar Bhaisare affirmed on 16th June, 2021, submitted that application filed by petitioner was incomplete to process the claim, additional documents with reference to queries in respect of the application were submitted by petitioner on 10th June, 2019, another query memo dated 8th July, 2019 was issued to petitioner and an opportunity to have a personal hearing with reference to queries raised were also given. Shri Deshmukh submitted that therefore the delay could not be attributed to respondent and the delay was only because of petitioner submitting incomplete application. Therefore, the question of paying any interest would not arise.

8. Shri Paranjape responded to this argument of Shri Deshmukh by submitting that three months period provided to process the claim was to enable respondent to raise objections / point out defects in the application to the applicant and if respondent would take its own time, in this case almost a year later objections were raised, respondent cannot raise the defence application being incomplete. Shri Paranjape submitted that if the applications were so defective, first of all respondent would not have granted refund and secondly respondent could have rejected the application.

9. Shri Paranjape relied upon judgment of the Apex Court in Union of India vs. Hamdard (WAQF) Laboratories, 2016 (333) E.L.T. 193 (SC) where paragraph 9, 11, 12, 14, 17, 18 and 21 read as under :

“9. Presently to the flash back. In pursuance of the order passed by the competent authority, an amount of Rs.3,74,00,000/- was refunded by cheque no.639266 dated 15.11.2000 payable at PNB Navyug Market, Ghaziabad. As no interest was paid by the appellant, the respondent filed a Civil Miscellaneous Writ Petition No. 249 of 2001 before the High Court