No Fault with IO allowing Interest Rate at 12%: CESTAT Rejects appeal Contrary to Provisions of S. 11BB [Read Order]
The Court reiterated the well settled position of law that a fiscal legislation has to be construed strictly without reading anything into it
The Customs, Excise and Service Tax Appellate Tribunal (CESTAT) Bench at Allahabad has held that where refund is governed bySection 11B of the Central Excise Act, 1944, the interest payable is strictly in terms of Section 11BB and the notified rate thereunder, and not at 12% as claimed.
M/s Sheela Foam Ltd. appealed against Order-in-Appeal dated 26.05.2025 passed by the Commissioner (Appeals), CGST, Noida. The order allowed refund of Rs. 35,60,087 along with interest at the prescribed rate under Section 11BB of the Central Excise Act, 1944. The appellant sought interest at 12% from the date of deposit till sanction of refund.
The Bench comprising Sanjiv Srivastava (Technical Member), heard the matter and pronounced the order on 02.02.2026.
The appellant had reversed CENVAT credit of Rs. 41,01,620 following a fire accident in its factory on 27.08.2009. An application for remission of duty under Rule 21 of the Central Excise Rules, 2002 was initially rejected and demand of duty along with interest was confirmed. Subsequent proceedings resulted in Tribunal orders allowing remission, after which the appellant filed a refund claim of Rs. 35,60,087.
The Commissioner (Appeals) allowed the refund along with interest at the rate prescribed under Section 11BB. Aggrieved by denial of interest at 12%, the appellant preferred the present appeal, placing reliance on various Tribunal decisions including Parle Agro Pvt. Ltd., Continental Engines Pvt. Ltd., R S Enterprises, which followed the decision of the Supreme Court in Sandvik Asia Ltd.
The Tribunal observed that the decisions relied upon by the appellant related to refund of revenue deposits or pre-deposits made during investigation or adjudication, where no specific statutory provision prescribed the rate of interest. In those cases, interest at 12% had been granted by drawing guidance from other provisions such as Sections 11AA, 11BB and 11DD.
However, the Tribunal noted that the Supreme Court in CIT v. Gujarat Fluoro Chemicals and Willowood Chemicals Pvt. Ltd. had clarified that where the statute prescribes a specific rate of interest, the same must be adhered to. It was observed that Sandvik Asia was rendered in peculiar facts involving inordinate delay and does not lay down that interest at a higher rate is payable in all cases of delayed refund.
The Tribunal held that the amount claimed as refund following its earlier order was nothing but Central Excise duty and such refund is governed by Sections 11B and 11BB of the Central Excise Act, 1944. Therefore, interest is payable only at the rate notified under Section 11BB and not at 12% as claimed.
Accordingly, the Tribunal dismissed the appeal finding no merit in it.
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