M/S Shree Balaji Aromatics ... vs Union Of India Thru' Min. Of ...
2014 Latest Caselaw 1166 ALL

HIGH COURT OF JUDICATURE AT ALLAHABAD
 
 

	COURT NO.33
 
CIVIL MISC. WRIT PETITION NO.1062 OF 2007 
 

 
M/s Shree Balaji Aromatics Private
 
Limited and another.			 		....Petitioners
 
Vs.
 

 
Union of India and others. 		                  ....Respondents
 

 
************
 
Hon'ble Rajes Kumar,J.

Hon'ble Shashi Kant, J.

( By Hon'ble Rajes Kumar, J. )

Heard Sri Pankaj Bhatia, learned counsel for the petitioners and Sri B.K.S.raghuvanshi, learned counsel appearing on behalf of the respondents.

By means of the present writ petition, petitioner is seeking a direction to the respondents to pay the refund as claimed in various refund claims along with interest thereon, filed under Section 11-BB of the Income Tax Act, 1961.

The petitioner filed some of the refund claims in the year 2005, some in the year 2006 and some in the year 2007. The details of the claim are mentioned in the order of adjudication dated 08.05.2007. The said refund claim has been allowed by order dated 08.07.2007. However, interest on the pending refund claim has been denied in view of the letter dated 26.04.2007, the correct date of letter is 20.04.2007, by which the petitioner has informed that they have decided not to claim the interest against the claim.

Learned counsel for the petitioner submitted that out of the total refund claims in respect of some of the refund claims, despite the refund claims being allowed, show cause notices have been issued by the Assistant Commissioner to deny the refund claims. However, in respect of some claims, refund has been granted. Submission of learned counsel for the petitioner is that, interest under Section 11BB of Central Excise Act, 1944 (hereinafter referred to as the "Act") being statutory and automatic, is payable without any claim in case, if refund is not made within thirty days from the date of receipt of the application. It does not depend upon the claim and can not be denied on the ground of waiver of the claim of interest by the party. Thus, even though the petitioner has written a letter for not claiming the interest, the claim of interest can not be denied under Section 11BB of the Act as it is mandatory and payable automatically.

Reliance is placed on the circular no.670/61/2002-CX, dated 01.10.2002. The decision of the Apex Court in the case of Ranbaxy Laboratories Ltd. Vs. Union of India, reported in 2011 (273) ELT, 3 (SC). The Division Bench decision of this Court in the case of Aroma Chemicals Vs. Union of India, reported in 2013 (298) ELT, 41 (All).

He further submitted that for the illegal withholding of the amount of interest, the petitioner is also liable for interest on interest. Reliance has been placed on the decision of the Apex Court in the case of Sandvik Asia Ltd. Vs. Commissioner of Income TAx-1, Pune, reported in 2006 (196) ELT, 257 (SC). He further submitted that the petitioner has waived the claim for interest on the verbal undertaking given by the respondent that the claim of refund would be allowed expeditiously, within a reasonable period but the same has not been allowed within a reasonable period, inasmuch as subsequently out of the total refund claims, despite being allowed, show cause notices have been issued to withdraw the claim, which is pending consideration.

Learned counsel for the respondent submitted that the petitioner has written a letter for not claiming the interest and, therefore, the petitioner is not entitled to claim the interest as the petitioner has waived his right to claim the interest.

We have considered the rival submissions.

Section 11BB of the Act reads as follows:

"Interest on delay 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 application 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:

Provided that 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 [National Tax Tribunal] or any court against an order of the [Assistant Commissioner of Central Excise or Deputy Commissioner of Central Excise], under sub-section (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]."

A bare perusal of Section 11BB of the Act, reveals that the payment of interest is not depended on the claim by the party. It is automatic. In case, if refund is not paid within three months from the date of receipt of the application, the authority concerned is under obligation to pay the interest. In Section 11BB of the Act the word used is "there shall be paid to the applicant." It means that it is not discretionary and has to pay. The payment of interest is statutory and automatically. The waiver of the interest by the party has no relevance and on the said ground payment of interest can not be denied.

Circular no.670/61/2002-CX, dated 01.10.2002 reads as follows:

"In this connection, Board would like to stress 2. that the provisions of section 11BB of Central Excise Act, 1944 are attracted automatically for any refund sanctioned beyond a period of three months. The jurisdictional Central Excise Officers are not required to wait for instructions from any superior officers or to look for instructions in the orders of higher appellate authority for grant of interest. Simultaneously, Board would like to draw attention to Circular No.398/31/98-CX, dated 2-6-98[1998 (100) E.L.T. T16] wherein Board has directed that responsibility should be fixed for not disposing of the refund/rebate claims within three months from the date of receipt of application. Accordingly, jurisdictional Commissioners may devise a suitable monitoring mechanism to ensure timely disposal of refund/rebate claims. Whereas all necessary action should be taken to ensure that no interest liability is attracted, should the liability arise, the legal provision for the payment of interest should be scrupulously followed."

The Apex Court in the case of Ranbaxy Laboratories Ltd. Vs. Union of India, (Supra) has held that Section 11BB of the Act comes into play only after an order for refund is being made. Section 11BB 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 the application to be submitted under sub-section (1) of Section 11BB 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 the application. The Explanation appearing below Proviso to section 11BB introduces a deeming fiction that where the order for refund of duty is not made by the Assistant Commissioner of Central Excise or Deputy Commissioner of Central Excise but by an Appellate Authority or the Court, then for the purpose of this Section the order made by such higher Appellate Authority or by the Court shall be deemed to be an order made under sub-section (2) of Section 11B of the Act. It is clear that the Explanation has nothing to do with the postponement of the date from which interest becomes payable under Section 11BB of the Act. Manifestly, interest under Section 11BB of the Act becomes payable, if on an expiry of a period of three months from the date of receipt of the application for refund, the amount claimed is still not refunded. Thus, the only interpretation of Section 11BB that can be arrived at is that interest under the said section becomes payable on the expiry of a period of three months from the date of receipt of the application under sub-section (1) of Section 11B of the Act and that the said Explanation does not have any bearing or connection with the date from which interest under Section 11BB of the Act becomes payable.

In view of the above, we are of the view that the petitioner is entitled for the interest under Section 11BB of the Act on the refunded amount, if the amount has been refunded after three months from the date of receipt of the application. Having regard to the facts and circumstances, of the present case, we are not impressed with the argument of learned counsel for the petitioner that the petitioner is entitled for interest on interest.

In the result, the writ petition is allowed in part. The authority concerned is directed to calculate the amount of interest under Section 11BB of the Act within a period of one month and pay the same within another period of one month in accordance to law.

Dt.24.04.2014.

R./