1. The present appeal is directed against the impugned order dt. 30/03/2019 passed by the Commissioner(Appeals) whereby the Commissioner(Appeals) has rejected the appeal of the appellant.
2. Briefly the facts of the present case are that the appellants are engaged in the manufacture of excisable goods, Automation Systems, falling under Chapter 85 of the CETA, 1985. They filed a refund claim on 29/12/2011 before the Refund Sanctioning Authority seeking for refund of an amount of Rs.29,94,278/- under Rule 5 of CENVAT Credit Rules, 2004. The same was rejected on the ground that the appellant failed to furnish documents in support of the refund claim vide Order-in-Original dt. 27/03/2012. Aggrieved by the said order, appellant filed appeal before the Commissioner(Appeals) who also rejected the appeal vide Order-in-Appeal dt. 17/10/2012. Aggrieved by the order of the Commissioner(Appeals), appellant filed appeal before the Tribunal and the Tribunal vide its Final order No.20500/2018 dt. 12/01/2018 allowed the appeal of the appellant. in pursuance of the Final Order of the Tribunal, appellant approached the adjudicating authority for grant of refund as ordered by the Tribunal. After following due process, the adjudicating vide Order-in-Original dt. 02/08/2018 granted the refund amount as claimed. However, the adjudicating authority rejected the claim of interest made under Section 11BB of the Central Excise Act, 1944 for the delay in granting the refund on the ground that Hon’ble CESTAT allowed the appeal of the appellant on the altogether new point and ground which was not existing at the time of rejection of the refund. Aggrieved by that part of the order rejecting the claim of the interest, the appellant preferred an appeal before the Commissioner(Appeals). The Commissioner(Appeals) vide the impugned order dt. 30/03/2019 upheld the finding of rejection of claim for interest. Hence the present appeal.
3. Heard both the sides and perused the records.
4.1. Learned counsel appearing for the appellant submitted that the impugned order is not sustainable in law as the same has been passed without properly appreciating the facts and the law. He further submitted that the claim of interest on the delayed refund has been rejected on the sole ground that Hon’ble CESTAT vide Final Order dt. 12/01/2018 has allowed the appeal based on altogether new ground which was not existing at the time of rejection of refund. He further submitted that adjudicating authority has held that the first refund application was filed on 29/12/2011 for refund of accumulated balance of cenvat credit under Rule 5 of the CCR, 2004 read with Notification No.05/2006-CE(NT) dt. 14/03/2006 whereas the Hon’ble CESTAT has allowed the refund claim on the ground that the unit/factory was closed in June 2012, which is totally a different ground and the said finding of the adjudicating authority has been upheld by the first appellate authority. learned counsel further submitted that both the lower authorities have failed to notice that the liability to pay interest arises on the factum of delay in granting the refund, which has nothing to do with the grounds on which the refund is granted. He also submitted that Section 11BB of the Central Excise Act, 1944 does not make any distinction between the refund granted on one ground or other. All that contemplates is that if there is a delay in granting refund, the interest thereon shall be paid to the claimant to the extent of delay. He further submitted that both the lower authorities have failed to note that the refund which has been granted now in pursuance to the Final Order passed by the CESTAT has arisen out of the one and only refund claim that was filed by the appellant and there are not two refund claims. He also submitted that Hon’ble CESTAT has allowed the appeal filed by the appellant on account of closure of the unit/factory, does not postpone the date of filing of the refund claim and hence the delay in granting the refund does not get abated. He further submitted that the main reason for the refund at the time of claim itself was that the operations of the appellants have become standstill and subsequently, in June 2012, the factory itself was completely closed by surrendering all the licenses and registrations. He also submitted that the ground of closure of factory for refund was actually taken before the Commissioner(Appeals) at the time of hearing on 09/07/2012 itself and this fact itself has been clearly recorded by the Commissioner(Appeals) in Order-in-Appeal No.559/2012 dt. 17/10/2012 in paragraph 3, which is reproduced herein below:-
3. The personal hearing in the case was held on 09.07.2012 and Shri Sudesh Arora appeared on behalf of the appellant and reiterated the points made in their appeal. He pleaded that the claim is rightly eligible under Rule 5 of Cenvat Credit Rules, 2004. The rebate claim was on duty paid on export items and these are not connected to the unutilized credit which is accumulated due to lesser domestic clearance. Further, he requested for more time for additional submissions. Vide their letter dated 21.09.2012, the appellant stated that they had simply asked for refund of credit balance lying in their Cenvat Credit as per Novermber, 2011 ER 1 statement. The adjudicating authority rejected the claim only on technical grounds. They have paid an amount of Rs.29,47,605/- with interest of Rs.4,42,737/- with interest of Rs.95,379/- in cash on 24.12.2010. These amounts were paid under the category of business auxiliary services for sales commission of their foreign agents and also towards commissioning charges of their exported products under the category of reverse charge mechanism. This is consequent on audit report of the Department. They have closed their factory in June, 2012 and hence could not utilize the credit lying in balance. Accordingly, they requested for refund under Rule 5.
4.2. It is his further submission that the ground of closure of factory was taken in the year 2012 itself before the Commissioner(Appeals) and therefore the finding of the adjudicating authority that the Hon’ble CESTAT has allowed the appeal based on altogether new ground is not sustainable. In support of his submission, the appellant relied upon the following:-
i. CBEC Circular No.670/61/2002-CX dt. 01/10/2002.
ii. Ranbaxy Laboratories Ltd. Vs. UOI&Ors [2011(10) TMI 16- Supreme Court]
iii. Jubilant Biosys Ltd. Vs. CST, Bangalore [2017(11) TMI 548- CESTAT Bangalore]
5. On the other hand, the learned AR defended the impugned order and submitted that the appellant never produced the proof of closure of business while filing the refund application on 29/12/2011. He also submitted that the said proof of closure of business was produced vide letter dt. 07/05/2018 evidencing closure of the unit on 22/06/2012. He also submitted that the first Order-in-Original rejecting the refund claim was passed on 27/03/2012 which is prior to closure date i.e. 22/06/2012. He further submitted that in accordance with CESTAT Final order dt. 12/01/2018, the refund was sanctioned vide Order-in-original dt. 02/08/2018 and therefore there is no delay in sanctioning the refund and hence no liability to pay interest arises.
6.1. After hearing both sides and considering the material on record, I find that the only issue involved in the present case is whether the appellant is entitled to the interest on delayed refund under the provisions of Section 11BB of the Central Excise Act, 1944. It is relevant to reproduce Section 11BB of the Central Excise Act, 1944, which is reproduced herein below:-
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 subsection (1) of that section, there shall be paid to that applicant interest at such rate, not below ten per cent and not exceeding thirty per cent per annum as is for the time being fixed by the Board, 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 or any court against an order of the Assistant 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.
6.2. I find that admittedly the refund claim was filed on 29/12/2011 and the same was rejected by the original authority on 27/03/2012 and the appeal against the said order was also rejected by the Commissioner(Appeals) vide order dt. 17/10/2012. Further I find that the Tribunal vide its Final order dt. 12/01/2018 has allowed the appeal of the appellant and in pursuance to the Final order, the original authority sanctioned the refund vide order dt. 02/08/2018 but did not grant interest which was demanded by the appellant for delay in sanctioning the refund. Further I find that the only ground on which the interest has been denied by the original authority and upheld by the appellant authority is that the CESTAT has allowed the appeal on altogether different ground which was not existing at the time of rejection of refund claim. Further I find that the appellant has raised the ground of closure of business before the Commissioner(Appeals) and also agitated the same at the time of personal hearing on 09/07/2012 itself and this fact is clearly recorded by the Commissioner(Appeals) in his order dt. 17/10/2012 in para 3 which is reproduced supra. Once the appellant has taken the ground of closure of factory in the year 2012 itself before the Commissioner(Appeals), then thereafter the adjudicating authority holding that the Tribunal has allowed the appeal on altogether new ground is not sustainable in law. Further I find that the law on the payment of interest has been settled by the Hon’ble Apex Court in the case of Ranbaxy Laboratories Ltd. cited supra wherein the Hon’ble Apex Court, in paragraphs 14 & 15 has held as under:-
14. At this stage, reference may be made to the decision of this Court in Shreeji Colour Chem Industries (supra), relied upon by the Delhi High Court. It is evident from a bare reading of the decision that insofar as the reckoning of the period for the purpose of payment of interest under Section 11BB of the Act is concerned, emphasis has been laid on the date of receipt of application for refund. In that case, having noted that application by the assessee requesting for refund, was filed before the Assistant Commissioner on 12th January 2004, the Court directed payment of Statutory interest under the said Section from 12th April 2004 i.e. after the expiry of a period of three months from the date of receipt of the application. Thus, the said decision is of no avail to the revenue.
15. In view of the above analysis, our answer to the question formulated in para (1) supra is that the liability of the revenue to pay interest under Section 11BB of the Act commences from the date of expiry of three months from the date of receipt of application for refund under Section 11B(1) of the Act and not on the expiry of the said period from the date on which order of refund is made.
6.3. Further I find that in the case of Jubiliant Biosys Ltd. cited supra, the Tribunal has followed the decision of Ranbaxy Labs case and allowed the appeal of the appellant seeking interest for delayed refund. Further I find that in the case of CC Airport & ACC Bangalore Vs. Pfizer products India Pvt. Ltd. [2015(324) ELT 259 (Kar.)], the Hon’ble High Court of Karnataka, after considering the provisions to grant interest on delayed refun, in para 11 has observed as under:-
11. From plain reading of the said Section, it is clear, the interest
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would be payable if the amount is not refunded within three months from the date of the application. The rate of interest would vary from 5% to 30% per annum, as may be fixed by the Central Government by Notification from time to time. Explanation immediately after the proviso in the said Section only means that the liability to pay the amount would arise after the order of refund of the amount is finalized, either in appeal or by the Commissioner, Tribunal or the Court, but such liability would be from three months after the date of application. The same cannot be interpreted that the liability to pay interest would be from the date of the order of the Tribunal or the Court, which may be passed in appeal. 6.4. Further I also find that the decision of the Hon’ble Apex Court in the case of Ranbaxy Laboratories Ltd. has been followed consistently and there has been no contrary judgment. Therefore by following the ratio of the Apex Court in the case of Ranbaxy Laboratories Ltd., I hold that the impugned order is not sustainable in law and I set aside the same by allowing the appeal of the appellant. The original authority will quantify the interest after the expiry of 3 months from the date of filing of the refund claim till the interest is finally sanctioned. For the purpose of quantification, the matter is remanded to the original authority. Appeal is accordingly disposed of.