Interest u/s 11BB payable for delayed refund of Unutilized CENVAT credit – High Court

Interest u/s 11BB of Central Excise Act 1944 payable even for delayed refund of Unutilized CENVAT credit under Rule 5 of the CENVAT Credit Rules & Notification dated 18.6.2012 – High Court

ABCAUS Case Law Citation:
ABCAUS 2826 (2019) (03) HC

Important Case Laws Cited/relied upon by the parties
Ranbaxy Laboratories vs. Union of India reported in 2011(273)ELT 3(SC)
Commissioner of Central Excise vs. Reliance Industries Ltd. 2010(259) ELT 356 (Guj)

The instant Central Excise Appeal was filed by the appellant Revenue against the order passed by the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) in allowing to the respondent company, interest u/s 11BB of the Central Excise Act, 1944 (The Act) on

The respondent was offering Information Technology Software Services and realized export proceeds in convertible foreign currency. The respondent filed its returns in Form ST-3. Thereafter, the respondent filed claims for refund of Unutilized CENVAT Credit for the period three years under Rule 5 of the CENVAT Credit Rules, 2004 (The Rules).

The Assessing Officer allowed the claims for refund as provided for under Rule read with Notification No.27/2012-CE(NT) dated 18.6.2012 (Notification). However, interest for the delay in refund was denied.

Commissioner of Central Taxes (Appeals) dismissed the appeal of the respondent holding that the respondent was not entitled for interest because the provision for payment of interest on delayed refund under Section 11BB of the Act would apply only where there has been excess payment or collection of duty. The Appellate Commissioner held that refund of Unutilized CENVAT Credit, as such Schema is nothing more than a facilitative mechanism provided to the exporter to convert the unutilized credit lying in its account into cash.

The respondent preferred an appeal with the Appellate Tribunal which by its impugned final order allowed the appeal and set aside the order of the Appellate Commissioner.

The Hon’ble High Court observed that the High Court of Gujarat while considering a similar case concluded that the CENVAT credit is nothing but duty paid by the supplier of inputs which is actually already received by the exchequer. Therefore it rejected the argument that refund of unutilized CENVAT credit is different from excess duty paid or collected as contemplated under Section 11B of the Act. As such, the High Court of Gujarat held that when there is delay in sanctioning the refund under Rule 5 of the CENVAT Credit Rules & Notification dated 18.6.2012, the provisions of Section 11BB of the Central Excise Act would be clearly attracted.

Similarly, it was observed that the madras High Court had also concluded that the MODVAT Credit taken was nothing but payment of duty which would be available

to the assessee on the assessee paying duty on inputs at the time of clearance of final bills and therefore, there is statutory obligation on the part of the revenue under Section 11BB of the Act to pay interest for the delayed refund of the duty.

The Hon’ble High Court concurred with the reasons assigned in the order of the CESTAT’s to hold that the revenue would be obliged to pay under interest for the delayed refund as contemplated under Section 11BB of the Act even for the delayed refund of the Unutilized CENVAT credit under Rule 5 & Notification dated 18.6.2012.

The Hon’ble High Court also expressed agreement with the submissions on behalf of the respondent that in view of the decision of the Hon’ble Supreme Court, there cannot be any dispute about the liability of the Revenue to pay interest under Section 11BB of the Act commencing from the date of expiry of three months from the date of receipt of application for refund under Section 11B(i) of the Act.

Accordingly, the High Court dismissed the appeal by the Revenue.

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