Interest On Delayed Excise Refund Payable After 3 Months From Refund Application, Not From Appellate Order: CESTAT

The Allahabad Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has held that interest on delayed refund under Section 11BB of the Central Excise Act, 1944 becomes payable after the expiry of three months from the date of filing of the refund application and not from the date of the appellate order allowing the refund claim. The bench of Sanjiv Srivastava (Technical Member) has observed that the extraordinary compensation granted in Sandvik Asia was based on peculiar facts involving inordinate delays extending up to 17 years and could not be treated as a general proposition permitting grant of “interest on interest” in every tax refund dispute. The dispute arose from a service tax demand of ₹25.10 lakh confirmed against the appellant for the period from 9 July 2004 to 30 September 2005, along with equivalent penalties. Subsequently, the assessee filed a rebate/refund claim amounting to ₹73.86 lakh in relation to exports made to countries other than Nepal and Bhutan under Rule 18 of the Central Excise Rules, 2002. While the refund claim was sanctioned by the adjudicating authority through Order-in-Original dated 14 February 2008, an amount of ₹49.22 lakh was appropriated against the pending confirmed dues arising out of the earlier service tax demand. The assessee challenged this appropriation before the Commissioner (Appeals), who allowed the appeal and set aside the appropriation order. Thereafter, the appellant sought release of the appropriated amount, and the department eventually refunded ₹49.22 lakh on 29 July 2008. However, no interest was granted for the delay in refunding the amount. Aggrieved by denial of interest, the appellant approached the Tribunal contending that Section 11BB clearly mandates payment of interest if the refund is not made within three months from the date of receipt of the refund application. The assessee argued that interest should therefore be paid for the period between 14 February 2008 and 29 July 2008. Reliance was placed on several judicial precedents including the Supreme Court judgment in Ranbaxy Laboratories Ltd. v. Union of India. The Commissioner (Appeals), however, had rejected the claim by holding that the refund had been granted within the stipulated period from the date of the appellate order and therefore no delay could be attributed to the department under Section 11BB. Examining the issue, the Tribunal relied extensively on the Supreme Court ruling in Ranbaxy Laboratories Ltd., wherein the apex court clarified that interest under Section 11BB becomes payable after three months from the date of receipt of the refund application under Section 11B(1), irrespective of the date on which the refund is ultimately ordered by an appellate authority or court. The Tribunal observed that the explanation appended to Section 11BB merely creates a deeming fiction treating appellate refund orders as orders under Section 11B(2), but does not postpone the commencement of interest liability. It emphasized that the statutory provision does not permit shifting the date for computation of interest to the date of the appellate order. Applying the ratio of the Supreme Court judgment, the Tribunal noted that the appellant had filed the refund/rebate claim on 15 November 2007 and therefore interest became payable from 15 February 2008, i.e., after expiry of three months from the refund application date. Since the amount remained unpaid till 29 July 2008, the assessee was held entitled to statutory interest for that period. The appellant had also sought “interest on delayed payment of interest,” relying upon the Supreme Court judgment in Sandvik Asia Ltd. and certain Tribunal decisions. However, the Tribunal rejected this contention after undertaking a detailed analysis of the legal position relating to “interest on interest.” The Tribunal referred to the Larger Bench decision in Sun Pharmaceuticals and subsequent Supreme Court rulings including Gujarat Fluoro Chemicals and Willowood Chemicals Pvt. Ltd., observing that unless a statute specifically provides for payment of interest on delayed interest, such relief cannot be granted by judicial interpretation. The Tribunal partly allowed the appeal and held that the appellant was entitled to statutory interest at the prescribed rate of 6% on ₹49.22 lakh for the period from 15 February 2008 to 29 July 2008. However, the claim for interest on delayed payment of such interest was rejected. Case Details Case Title: M/s Lohia Starlinger Ltd. Versus Commissioner of Central Goods & Services Tax, Kanpur Citation: JURISHOUR-1194-CES-2026(ALL) Case No.: Excise Appeal No.83 of 2009 Date: 08/05/2026 Counsel For Appellant: Ankur Goel, Advocate Counsel For Respondent: Prashant Kumar, Authorised Representatives Click Here To Read Order Read More: Service Tax Demand Can’t Be Raised Merely On ST-3 And Income Tax Return Mismatch Without Examining Books Of Accounts: CESTAT

Interest On Delayed Excise Refund Payable After 3 Months From Refund Application, Not From Appellate Order: CESTAT

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