Section 11BB of Central Excise Tax does not distinguish between intentional and unintentional delay: Bombay High Court

 on 21 05 2021 on 22 03 WP1775_20.docIN THE HIGH COURT OF JUDICATURE AT BOMBAYCIVIL APPELLATE JURISDICTIONWRIT PETITION NO.1775 OF 2020Qualcomm India Private Limited…PetitionerVs.Union of India and others …RespondentsMr. Prakash Shah a w. Mr. Arun Jain and Mr. Jas Sanghvi i b. PDSLegal for Petitioner.Mr. Sham Walve a w. Mr. Ram Ochani for Respondents. CORAM : UJJAL BHUYAN &MILIND N. JADHAV JJ.Reserved on :JANUARY 12 2021Pronounced on:MAY 21 2021Judgment and Order :Hyderabad in its own case granting interest on therefund amount sanctioned belatedly.10.Respondent No.3 vide letter dated 21.06.2019 informed thepetitioner that no other document evidencing that refund was sanctionedlate had been submitted. Hence he stated that claim for interest could6 17 on 21 05 2021 on 22 03 WP1775_20.docnot be processed on the basis of the letter dated 02.05.2019. However inthe said letter respondent No.3 completely ignored the previous letter ofthe petitioner dated 15.05.2017 and that the letter dated 02.05.2019 wasonly a sequitur to the earlier letter dated 15.05.2017.10.1.Notwithstanding the above petitioner again renewed the prayerfor grant of interest on delayed refund vide letter dated 20.08.2019followed by reminder dated 10.09.2019. However petitioner has notreceived any communication from the office of respondent No.3.11.Aggrieved present writ petition has been filed seeking the reliefas indicated above.12.Respondent Nos.2 and 3 have filed a common reply affidavitthrough Shri. Milind Gawai Principal Commissioner of Central Goodsand Services Taxand Central Excise Mumbai EastCommissionerate. At the outset an objection has been raised thatpetitioner has an alternative remedy of filing appeal before theCommissioneragainst the orders in original declining interest.Since petitioner has not availed the alternative remedy petitioner may berelegated to the appellate forum for the reliefs sought for.12.1.On merit it is stated that petitioner had filed refund applicationsand after scrutiny of the applications the refund sanctioning authorityhad issued various show cause notices to the petitioner as to why therefund claims made by the petitioner should not be rejected inter alia onthe ground that the input services did not have any nexus with the outputservices exported and were thus not eligible for refund. Petitioner wasalso required to produce all the evidences upon which it intended to relyon in support of its claim. Personal hearing was also granted to thepetitioner.12.2.Refund sanctioning authority passed various orders in original7 17 on 21 05 2021 on 22 03 WP1775_20.docpartially sanctioning the refund amount and partially rejecting the refundamount. In some of the cases the refund claim was partially rejected onthe ground that the input services did not have any nexus with the outputservices exported and thus were not eligible to refund. In the remainingcases refund claims were sanctioned by the sanctioning authority afterscrutinizing entire relevant documents submitted by the petitioner.Further refund amount of partially rejected claims were also sanctionedafter receiving orders of the appellate authority i.e. Commissioner(Appeals) on appeals filed by the petitioner. With the implementation ofgoods and services taxwith effect from 01.07.2017 thedepartmental set up was required to be re organized. This exercise of re organization caused certain delay in processing of appeals and in issuingfurther orders sanctioning refund as per the order in appeals. However there was no intentional delay by the refund sanctioning authority.12.3.It is stated that refund claims were sanctioned granted undersection 11B of the Central Excise Act 1944 as made applicable toservice tax vide section 83 of the Finance Act 1994. Refund claims weresanctioned after personal hearing and after scrutinizing the entirerelevant documents of the petitioner. There was no intentional delay insanctioning of refund by the refund sanctioning authority.13.Learned counsel for the parties have made submissions based onthe pleadings. Mr. Shah learned counsel for the petitioner has assertedthat payment of interest under section 11BB of the Central Excise Act 1944 is mandatory in all the 19 refund applications filed by thepetitioner as the refund claims were allowed much after three months ofreceipt of the applications. Therefore under section 11BB of the CentralExcise Act 1944 as made applicable to service tax vide section 83 of theFinance Act 1994 petitioner is entitled to interest as a matter of right forsuch delayed payment of refund. There is no question as to whether thedelay caused in refund is intentional or not intentional. Besidesreferring to sections 11B and 11BB of the Central Excise Act 8 17 on 21 05 2021 on 22 03 WP1775_20.doc1944 and circular dated 01.10.2002 of the Central Board of Excise andCustoms Mr. Shah has placed reliance on a number of decisions whichhe has furnished by way of a compilation.14.On the other hand Mr. Walve learned counsel for the respondentshas reiterated the averments made in the reply affidavit filed on behalf ofrespondent Nos.2 and 3 and asserts that there was no intentional delay ingranting the refund to the petitioner. Therefore question of payment ofinterest would not arise. As such the writ petition should be dismissed.15.Submissions made by learned counsel for the parties havereceived the due consideration of the Court. Also perused the judgmentscited at the Bar.16.Section 11B of the Central Excise Act 1944 deals with claim forrefund of duty and interest if any paid on such duty. Relevant portion ofsection 11B reads as under: “Section 11B. Claim for refund of duty and interest if any paid on such duty as the applicant may furnish toestablish that the amount of duty of excise and interest if any paid on such duty in relation to which such refund is claimedwas collected from or paid by him and the incidence of suchduty and interest if any paid on such duty had not been passedon by him to any other person :Provided that where an application for refund has beenmade before the commencement of the Central Excises andCustoms LawsAct 1991 such application shallbe deemed to have been made under this sub section asamended by the said Act and the same shall be dealt with inaccordance with the provisions of sub sectionsubstitutedby that Act :9 17 on 21 05 2021 on 22 03 WP1775_20.docProvided further that the limitation of one year shall notapply where any duty and interest if any paid on such duty hasbeen paid under protest.(2)If on receipt of any such application the AssistantCommissioner of Central Excise or Deputy Commissioner ofCentral Excise is satisfied that the whole or any part of the dutyof excise and interest if any paid on such duty paid by theapplicant is refundable he may make an order accordingly andthe amount so determined shall be credited to the Fund :Provided that the amount of duty of excise and interest if any paid on such duty as determined by the AssistantCommissioner of Central Excise or Deputy Commissioner ofCentral Excise under the foregoing provisions of this sub section shall instead of being credited to the Fund be paid tothe applicant if such amount is relatable to unspent advance deposits lying in balance in theapplicant s account current maintained with theCommissioner of Central Exciseofthe first proviso shall be issued unless in the opinion of theCentral Government the incidence of duty and interest if any paid on such duty has not been passed on by the personsconcerned to any other person.(3)Notwithstanding anything to the contrary contained inany judgment decree order or direction of the Appellate10 17 on 21 05 2021 on 22 03 WP1775_20.docTribunal or any Court or in any other provision of this Act orthe rules made thereunder or any other law for the time beingin force no refund shall be made except as provided in sub sectionof section 11B says that any person claimingrefund of any duty of excise and interest if any paid on such duty maymake an application for refund of such duty and interest if any paid onsuch duty to the Assistant Commissioner of Central Excise or DeputyCommissioner of Central Excise before the expiry of one year from therelevant date in such form and in such manner as may be prescribed. Theapplication shall be accompanied by documentary and other evidence insupport of the claim. Sub sectionof section 11B provides that uponreceipt of any such application if the Assistant Commissioner of CentralExcise or Deputy Commissioner of Central Excise is satisfied that thewhole or any part of the duty of excise and interest if any paid on suchduty by the applicant is refundable he may make an order accordinglywhereafter the amount is to be refunded.17.Section 11BB deals with interest on delayed refunds. Since thisprovision is relevant the same is extracted hereunder: “Section 11 BB. Interest on delayed refunds. If any duty ordered to be refunded under sub sectionofsection 11B to any applicant is not refunded within threemonths from the date of receipt of application under sub sectionof that section there shall be paid to that applicantinterest at such rate not below five per cent and not exceedingthirty per cent per annum as is for the time being fixed by theCentral Government by Notification in the Official Gazette onsuch duty from the date immediately after the expiry of threemonths from the date of receipt of such application till the dateof refund of such duty :Provided that where any duty ordered to be refundedunder sub sectionof section 11B in respect of anapplication under sub sectionof that section made beforethe date on which the Finance Bill 1995 receives the assent ofthe President is not refunded within three months from suchdate there shall be paid to the applicant interest under thissection from the date immediately after three months from such11 17 on 21 05 2021 on 22 03 WP1775_20.docdate till the date of refund of such duty.Explanation. Where any order of refund is made by theCommissionerAppellate Tribunal National TaxTribunal or any court against an order of the AssistantCommissioner of Central Excise or Deputy Commissioner ofCentral Excise under sub sectionof section 11B the orderpassed by the CommissionerAppellate Tribunal National Tax Tribunal or as the case may be by the court shallbe deemed to be an order passed under the said sub sectionof section11B to any applicant is not refunded within three months from the dateof receipt of application under sub sectionof section 11B there shallbe paid to that applicant interest at such rate which is not below 5% andnot above 30% per annum as may be fixed by the central government by notification in the Official Gazette. The interest will be calculated forthe period commencing from the date immediately after expiry of threemonths from the date of receipt of such application till the date of refundof such duty.18.We may also mention that section 83 of the Finance Act 1994makes it clear that provisions of those sections of the Central Excise Actmentioned therein shall apply as far as may be in relation to service taxas they apply in relation to a duty of excise. Sections 11B and 11BB ofthe Central Excise Act are included and accordingly the said sectionsshall be applicable in relation to service tax.19.Central Board of Excise and Customs New Delhi had issued acircular dated 01.10.2002 regarding non payment of interest in refund rebate cases which were sanctioned beyond three months of filing ofapplication. Referring to section 11BB of the Central Excise Act andrepresentations received from claimants expressing grievance thatinterest due to them on sanction of refund rebate claims beyond theperiod of three months had not been granted by the central excise12 17 on 21 05 2021 on 22 03 WP1775_20.docformations the Central Board stressed that provisions of section 11BBof the Central Excise Act are attracted automatically for any refundsanctioned beyond the period of three months. The jurisdictional centralexcise officers were impressed upon not to wait for instructions fromany superior officer for grant of interest. It was emphasized that allnecessary actions should be taken to ensure that no interest liability isattracted but should the liability arise the legal provision for payment ofinterest should be scrupulously followed. The aforesaid circular dated01.10.2002 is quoted hereunder: “ Circular No.670 61 2002 CX dated 1 10 2002F.No.268 51 2002 CX.8Government of IndiaMinistry of FinanceE.L.T. T16] wherein Board hasdirected that responsibility should be fixed for not disposing ofthe refund rebate claims within three months from the date ofreceipt of application. Accordingly jurisdictional13 17 on 21 05 2021 on 22 03 WP1775_20.docCommissioners may devise a suitable monitoring mechanism toensure timely disposal of refund rebate claims. Whereas allnecessary action should be taken to ensure that no interestliability is attracted should the liability arise the legalprovision for the payment of interest should be scrupulouslyfollowed.” 20.In Ranbaxy Laboratories Limited Vs. Union of India 10SCC 292 Supreme Court held that section 11BB comes into play onlyafter an order for refund has been made under section 11B but interestunder section 11BB becomes payable if on expiry of a period of threemonths from the date of receipt of the application for refund the amountclaimed is still not refunded. Thus the only interpretation of section11BB that can be arrived at is that interest under the said sectionbecomes payable on the expiry of a period of three months from the dateof receipt of the application under sub sectionof section 11B of theCentral Excise Act. It was pointed out that it is a well settled propositionof law that a fiscal legislation has to be construed strictly one has tolook merely at what is said in the relevant provision there is nothing tobe read in nothing to be implied and there is no room for anyintendment. On the basis of the above provisions Supreme Courtclarified that the liability of the revenue to pay interest under section11BB of the Central Excise Act commences from the date of expiry ofthree months from the date of receipt of application for refund undersection 11B(1) and not on the expiry of three months from the date onwhich order of refund is made.21.Shroff United Chemicals Limited Vs. Union of India 2011Limited Vs. Union of India 2013ELT 1314 17 on 21 05 2021 on 22 03 WP1775_20.docexamined the question as to entitlement of the petitioners to interestunder section 11BB of the Central Excise Act on delayed excise dutyrefund by the department to the petitioners. From a conjoint reading ofsections 11B and 11BB of the Central Excise Act it was held that if anyrefund of excise duty is ordered under section 11B(2) the same has to berefunded within three months from the date of receipt of applicationunder sub sectionof section 11B failing which interest would have tobe paid. Language of section 11B is very clear and unambiguous. Itspeaks of claiming refund of any duty of excise. No exception isprovided. It does not distinguish or differentiate between any kind ofexcise duty refund whether duty paid in excess or duty paid which areexempted. Reference was made to the decision of the Supreme Court inRanbaxy Laboratories LimitedLaboratories 2016ELT 193 the decision inRanbaxy Laboratories Limitedwas referred to and wasconcurred with. In the facts of that case it was held that it is obligatoryon the part of the revenue to intimate the assessee to remove deficiencyin the application if there are deficiencies within two weeks and in anyevent if there are still deficiencies it can proceed with the adjudicationand reject the application for refund but the adjudicatory process by nostretch of imagination can be carried on beyond three months. It isrequired to be concluded within three months failing which the statutoryconsequences mandated by section 11BB would come into play.24.Thus what can be culled out from the above is that if anapplication for refund is made the same is required to be adjudicatedwithin three months of receipt of the application. But if the refund isgranted after three months of receipt of the application then theapplicant would be entitled to interest on such delayed refund as a matterof right. The interest would cover the period from the date immediatelyafter expiry of the period of three months from the date of receipt of the15 17 on 21 05 2021 on 22 03 WP1775_20.docapplication till the date of payment of the refund.25.Adverting to the facts of the present case we have alreadyextracted the two statements furnished by the petitioner in the writpetition. In the first statement the dates of refund applications arementioned. In the second statement the dates of orders granting refundare mentioned. These statements are not disputed by the respondents.From a comparison of the two statements it is evident that the ordersgranting refund were passed after expiry of three months from the dateof receipt of the refund applications. Taking up one such refund orderdated 04.02.2010 pertaining to refund claim for the period from June 2008 to September 2008 we find that Assistant Commissioner ofService Tax Division III Mumbai had sanctioned refund claim ofRs.52 42 806.00 under section 11B of the Central Excise Act. The refundclaimwas received in the office on 29.06.2009 but therefund order was passed on 04.02.2010. Obviously there is delay andthe refund was granted much after expiry of three months from the dateof receipt of the application. In fact respondents have not disputed thatthe refund orders were passed beyond the period of three months fromthe date of receipt of the refund applications. Only defence put up is thatthere was no intentional delay by the respondents. We have alreadyanalyzed section 11BB of the Central Excise Act and the interpretationgiven thereto by the Supreme Court in Ranbaxy Laboratories Limited(supra). Section 11BB does not speak about or exempts any delay whichis not intentional. The section does not distinguish delay which isintentional and delay which is unintentional. Once there is delay inpayment of refund within three months from the date of receipt ofapplication rigour of section 11BB sets in and payment of interest onthe delayed refund becomes obligatory. It follows automatically as amatter of law being a mandate of the statute. Non granting of interest insuch a case would amount to failure to discharge statutory duty obligation by the refund sanctioning authority for which the aggrievedclaimant can seek a writ of mandamus from the Writ Court under Article16 17 on 21 05 2021 on 22 03 WP1775_20.doc226 of the Constitution of India. 26.Thus in the light of the discussions made above the writ petitionsucceeds. Petitioner would be entitled to interest under section 11BB ofthe Central Excise Act 1944 on the amounts refunded to it. RespondentNos.2 and 3 shall work out the interest amount payable to the petitionerin respect of the refund claims for the relevant periods which shall bepaid to the petitioner within three months from the date of receipt of acopy of this judgment and order.27.Writ petition is accordingly allowed. However looking into thefacts and circumstances of the case there shall be no order as to cost.(MILIND N. JADHAV J.) (UJJAL BHUYAN J.)17 17Minal Parab 

Summary: Once there is delay in payment of refund within three months from the date of receipt of application, rigour of section 11BB sets in and payment of interest on the delayed refund becomes obligatory. It follows automatically; as a matter of law being a mandate of the statute. A division bench comprising of Ujjal Bhuyan J and Milind N Jadhav J, while adjudicating the matter in Qualcomm India Private Limited Vs. Union of India and others; [WRIT PETITION NO.1775 OF 2020] dealt with tax exemption by a company. Petitioner is a company incorporated under the Companies Act, 1956 having its registered office at Bandra Kurla Complex, Mumbai. Petitioner is engaged in the business of providing support services primarily to its foreign affiliates. It is stated that services provided by the petitioner qualified as export of service under the erstwhile Export of Service Rules, 2006 as well as under rule 6A of the Service Tax Rules, 1994 read with rule 3 of the Place of Provision of Services Rules, 2012. Hence, petitioner did not pay any service tax on the output services so exported. This resulted into accumulation of CENVAT credit of service tax paid on input services. Several show cause notices were issued to the petitioner by the Assistant Commissioner i.e., respondent No.3 to show cause as to why the refund claims of the petitioner should not be rejected primarily on the ground that the input services did not have any nexus with the output services and thus were not eligible for refund. Responding to such show cause notices, petitioner submitted detailed replies enclosing therewith the requisite documents. Refund sanctioning authority passed orders in original in respect of the refund claims made by the petitioner partially sanctioning the refund amount and partially rejecting the refund amount. Against the orders partially rejecting the refund claim, petitioner preferred appeals before the appellate authority. Learned counsel for the respondent stated that there was no intentional delay in granting the refund to the petitioner. Therefore, question of payment of interest would not arise. As such, the writ petition should be dismissed.