Excise Dept. To Pay 12% Interest On Rebate Claims Withheld For More Than 12 Years Without Fault On Part Of Exporter: CESTAT

The Allahabad Bench of the Customs, Excise & Service Tax Appellate Tribunal (CESTAT) has directed the Central Excise Department to pay interest at 12% per annum on rebate claims amounting to Rs. 2.38 crore that were withheld for more than twelve years without fault on the part of the exporter. The bench of P.K. Choudhary (Judicial Member) observed that granting interest at the statutory rate of 6% under Section 11BB of the Central Excise Act, 1944 was wholly inadequate in cases of extraordinary and unexplained delay, and that higher interest was justified to compensate the assessee for prolonged deprivation of its legitimate dues. The appellant/assessee, Hindustan Mint & Agro Products Pvt. Ltd., was engaged in the manufacture and export of mentha-based products. The company procured raw materials from both local suppliers and manufacturers located in Jammu & Kashmir who were availing the area-based excise exemption under Notification No. 56/2002-CE. These supplies were treated as duty-paid goods, enabling the appellant to avail CENVAT credit and subsequently claim rebate on duty paid for exported goods. For the financial years 2008–09 and 2009–10, the exporter filed 67 rebate claims totaling ₹2.40 crore. While the claims were pending, the Department initiated investigations alleging that goods from Jammu & Kashmir were not physically received and that only invoices were used to avail CENVAT credit. Based on these allegations, 34 rebate claims were rejected, and show cause notices (SCNs) were issued for the remaining claims. Although multiple SCNs covering the period from 2003–04 to June 2009 were issued, the Department failed to adjudicate them for over 12 years. Aggrieved by this inordinate delay, the exporter approached the Punjab & Haryana High Court, which, in January 2021, quashed all pending SCNs, holding that such prolonged pendency was legally untenable. Following the High Court’s intervention, the Department finally sanctioned 66 rebate claims aggregating to ₹2.38 crore in October 2021. However, no interest was paid for the long delay. While the Commissioner (Appeals), Noida, accepted that interest was payable, he restricted it to the rate prescribed under Section 11BB (6% per annum). Challenging this, the exporter approached CESTAT, arguing that a statutory minimum rate could not apply in cases of gross administrative apathy and extraordinary delay. The appellant relied on several landmark judgments of the Supreme Court and High Courts, including ITC Ltd., Surinder Singh, and Sandvik Asia Ltd., to contend that interest at a higher rate—ranging from 12% to 15%—had consistently been awarded in similar circumstances. The Tribunal, presided over by Member (Judicial) P.K. Choudhary, strongly criticized the Department’s conduct, noting that the rebate claims were withheld without any fault of the exporter and solely due to departmental inaction. The Bench observed that interest is not a penalty, but a form of compensation for unlawful retention of money. Section 11BB cannot be mechanically applied where the delay is abnormal and unjustified. The courts have repeatedly held that higher interest is warranted where refunds or rebates are delayed for unreasonable periods. Relying on precedents upheld by the Supreme Court, the Tribunal held that the exporter was entitled to interest at 12% per annum, which it described as a fair and reasonable rate balancing equity and statutory guidance. The CESTAT modified the impugned Order-in-Appeal and directed the adjudicating authority to pay interest at 12% per annum on the sanctioned rebate amount of ₹2.38 crore, for the period stipulated under Section 11BB of the Central Excise Act, along with all consequential reliefs. Case Details Case Title: M/s Hindustan Mint & Agro Products Pvt. Ltd. Versus Commissioner of Central Excise & CGST, Gautam Budh Nagar Case No.: Excise Appeal No.70433 of 2022 Date: 28.01.2026 Counsel For Appellant: Abhinav Kalra, Advocate Counsel For Respondent: Santosh Kumar, Authorized Representative Click Here To Read Order Read More: Discounts Not Taxable as ‘Service’: CESTAT Quashes Rs. 285.74 Crore Service Tax Demand on Auto Dealer Incentives

Excise Dept. To Pay 12% Interest On Rebate Claims Withheld For More Than 12 Years Without Fault On Part Of Exporter: CESTAT

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Excise Dept. To Pay 12% Interest On Rebate Claims Withheld For More Than 12 Years Without Fault On Part Of Exporter: CESTAT

Membership Required

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