In a recent case, the Delhi bench of the Customs, Excise and Service Tax Appellate Tribunal ( CESTAT ) held that a delay in refunding a service tax rebate beyond the expiry of three months from the date of filing the refund application would attract Interest until the refund is realised. The tribunal resorted to the terms covered in Section 11BB of the Central Excise Act 1944 as made applicable to service matters.
DSS Image Tech Private Limited, the appellant, filed an appeal in the CESTAT against an order made by the Commissioner (Appeals). Initially, the assessee filed for adjudication on the matter, where the rebate claim was dismissed by the original authority. The assessee moved forward with an appeal to the tribunal, where such dismissal was reversed, and the assessee was granted the rebate amount. However, the adjudicating authority did not grant Interest for the delay in rebate.
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In a second round of litigation, the Commissioner (Appeals), in an order stated 20.02.2024, partially allowed the interest with effect from three months from the date of fresh applications filed, i.e. 11.03.2016. The appellant was aggrieved against the limited extent of interpreting the date for payment of interest as three months from 11.03.2016.
Mr R. Krishnan, counsel appearing for the appellant, moved the tribunal and submitted that the original application for the refund claim was complete, and the lower court had no finding on the basis of the application being incomplete. The counsel asserted that the question concerning payment of interest on delayed refund is categorically covered in terms of Section 11BB of the Central Excise Act 1944 as made applicable to service tax matters.
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Drawing reference to the case of Ranbaxy Laboratories Limited settled by the Supreme Court; the counsel argued that Section 11BB of the act comes into play after an order for refund has been made under Section 11B(1) of the Central Excise Act. It mandates such payment of interest only after the expiry of three months of such an order. The interpretation of the section, however, does not explain the postponement of the date from which interest has to be made.
The Counsel further contested that it was an undisputed fact that the appellant filed for the refund on 29.06.2007, and the appellant is entitled to the payment of interest at applicable rates three months from the said date of receipt of the refund application until such amount is paid.
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After considering the submissions made by the parties, the single bench consisting of Rajeev Tandon (Technical Member) ordered the order of the Commissioner (Appeals) to be set aside. It was held that the application for a refund made by the appellant initially had no errors, and interest will apply for the delay of that rebate.
The bench directed the revenue to make good the shortfall in interest amount paid to the appellant. The bench, considering the long duration of the litigation process of the instant matter, also directed the jurisdictional authorities to do what is needed within four months from the date of the order.
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