By TIOL News Service

NEW DELHI, MAR 02, 2016: THERE was a classification dispute and the assessee paid the duty as decided by the Department sometime in 1994. The assessee finally won in the Supreme Court in 1999 and filed a refund claim on 25th August 1999. By a letter dated 27.9.1999, the Department asked the assessee to prove that the incidence of duty has not been passed on to the customers. The assessee replied on 30.9.1999. There was a small mistake in the Supreme Court which the Department asked the assessee to get rectified. The Supreme Court issued a corrigendum. An amount of Rs.3,74,00,000/- was refunded by the Department on 15.11.2000.

As no interest was paid by the Department, the assessee filed a writ in the High Court. The High Court held that the liability for payment of interest is statutory and it is the bounden duty of the Assistant Commissioner to pay interest from 26th November, 1999 till 15th November, 2000 at the rate specified under Section 11-BB of the Act. The High Court also allowed costs of Rs.10,000.

The Revenue is in appeal against the High Court's order.

The Supreme Court observed,

Sub-section (2) of Section 11-B stipulates filing of an application by the assessee before the competent authority. It also postulates that the said authority is required to be satisfied that the whole or any part of the duty of excise and interest, if any, paid on such duty is refundable. The application, has to be an application in law. Section 11-BB which deals with interest on delayed refund clearly and categorically predicates that if any duty ordered to be refunded under sub-section (2) of Section 11-B is not refunded within three months from the date of receipt of the application under Section (1) of Section 11-B, there shall be paid to the applicant interest at the notified rate 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 significant words are "expiry of three months from the date of receipt of such application". In the instant case, the application was filed on 25th August, 1999. The said application, needless to emphasise, was preferred under sub-section (2) of Section 11-B.

The Supreme Court referred to the Board Circular dated 30th May, 1995, in which it was stipulated that:

(g) Where the refund application is found to be incomplete a letter shall be issued stating the deficiencies therein the additional information/document required within 48 hours of the receipt. In such cases the letter shall be issued only with the approval of a Superintendent and the period of 3 months, for purpose of Section 11-BB shall count from the date of receipt of all the requisite information or documents.

The Supreme Court referred to the decision in the Ranbaxy Laboratories Limited vs. Union of India & Ors - 2011-TIOL-105-SC-CX.

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.

The Supreme Court held,

It is obligatory on the part of the Revenue to intimate the assessee to remove the deficiencies in the application within two days and, in any event, if there are still deficiencies, it can proceed with adjudication and reject the application for refund. The adjudicatory process by no stretch of imagination can be carried on beyond three months. It is required to be concluded within three months. The decision in Ranbaxy Laboratories Limited (supra) commends us and we respectfully concur with the same.

The Supreme Court dismissed the Revenue Appeal.

(See 2016-TIOL-21-SC-CX)