M/S Ranbaxy Laboratories Ltd vs Union Of India & Ors

UNION OF INDIA & ORS. -- RESPONDENTS

WITH

CIVIL APPEAL NO. 7637 OF 2009

AND

CIVIL APPEAL NO. 3088 OF 2010

JUDGMENT

D.K. JAIN, J.:

1. The challenge in this batch of appeals is to the final

judgments and orders delivered by the High Court of Delhi in

W.P. No.13940/2009 and the High Court of Judicature at

Bombay in Central Excise Appeal Nos.163/2007 and 124 of

2008. The core issue which confronts us in all these appeals

relates to the question of commencement of the period for

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the purpose of payment of interest, on delayed refunds, in

terms of Section 11BB of the Central Excise Act, 1944 (for

short "the Act"). In short, the question is whether the

liability of the revenue to pay interest under Section 11BB of

the Act commences from the date of expiry of three months

from the date of receipt of application for refund or on the

expiry of the said period from the date on which the order of

refund is made?

2. As aforesaid, in all these appeals the question in issue being

the same, these are being disposed of by this common

judgment. However, in order to appreciate the controversy in

its proper perspective, a few facts from C.A. No. 6823 of 2010

may be noted. These are as follows:

The appellant filed certain claims for rebate of duty,

amounting to Rs.4,84,52,227/- between April and May 2003.

However, the Assistant Commissioner of Central Excise, vide

order dated 23rd June 2004, rejected the claim. Aggrieved, the

appellant filed an appeal before the Commissioner, Central

Excise (Appeals), who by his order dated 30th September 2004

allowed the appeal and sanctioned the rebate claim. Being

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aggrieved by the said order, the revenue filed an appeal before

the Joint Secretary, Government of India, Ministry of Finance,

but without any success. Ultimately rebate was sanctioned on

11th January, 2005. On 21st April 2005, appellant filed a claim for

interest under Section 11BB of the Act on account of delay in

payment of rebate.

3. A show cause notice was issued to the appellant on 5th July

2005, proposing to reject their claim for interest on the

ground that rebate had been sanctioned to them within three

months of the receipt of order of the Commissioner (Appeals)

dated 30th September, 2004. Upon consideration of the reply

submitted by the appellant, relying on Explanation to Section

11BB of the Act, the Assistant Commissioner rejected the

claim.

4. Against the said order, the appellant filed an appeal before

the Commissioner (Appeals). The Commissioner (Appeals)

allowed the appeal and directed the Assistant Commissioner

to compute and pay the interest to the appellant. Aggrieved

by the said direction, the Assistant Commissioner filed an

appeal before the Customs, Excise and Service Tax Appellate

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Tribunal (for short `the Tribunal'). However, the appeal was

dismissed by the Tribunal on the ground that it did not have

jurisdiction to deal with a rebate claim. Feeling aggrieved,

the Assistant Commissioner filed a revision application

before the Joint Secretary, Ministry of Finance, Govt. of India

who vide his order dated 30th July 2009 set aside the order

passed by the Commissioner (Appeals) and held that the

appellant was not entitled to interest under Section 11BB of

the Act.

5. Being dissatisfied with the said order, the appellant filed a

writ petition in the High Court of Delhi. Relying on the

decision of this Court in Union of India & Anr. Vs. Shreeji

Colour Chem Industries1, by the impugned order, the High

Court has affirmed the decision of the revisional authority and

held that the appellant is not entitled to interest under Section

11BB of the Act. Hence, in the lead case the assessee is in

appeal before us. However, in the connected appeals, the

High Court of Judicature at Bombay having affirmed the

decisions of the Tribunal, upholding the claim of the assessee

1 (2008) 9 SCC 515

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for interest under Section 11BB of the Act, the revenue is the

appellant.

6. Learned counsel appearing for the assessee contended that

the language of Section 11BB of the Act is clear and admits of

no ambiguity, in as much as the revenue becomes liable to

pay interest at the prescribed rate on refunds on the expiry of

three months from the date of receipt of application under

Section 11B(1) of the Act and such liability continues till the

refund of duty. Learned counsel urged that reliance on the

decision of this Court in Shreeji Colour Chem Industries

(supra) by the Delhi High Court in rejecting the claim for

interest is misplaced. It was contended that the said judgment

deals with two kinds of interest, viz. (i) equitable interest

because of delayed refunds and (ii) statutory interest payable

under Section 11BB of the Act. According to the learned

counsel in terms of the latter, the judgment supports the

assessee's claim, but the High Court has erroneously applied

the principle laid down for payment of equitable interest.

According to the learned counsel, the said decision clearly

holds that an assessee is entitled to interest under the said

Section after the expiry of three months from the date of

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receipt of application for payment of refund. In support of the

claim, learned counsel commended us to the order passed

by this Court in Union of India Vs. U.P. Twiga Fiber Glass

Ltd.2, whereby the appeal preferred by the revenue against

the decision of the Allahabad High Court has been dismissed.

In the said decision, following the decision of the Rajasthan

High Court in J.K. Cement Works Vs. Assistant

Commissioner of Central Excise & Customs3, the Allahabad

High Court had held that the relevant date for the purpose of

determining the liability to pay interest under Section 11BB of

the Act is with reference to the date of application, laying

claim for refund and not the actual determination of refund

under Section 11B(2) of the Act. To bolster the claim, learned

counsel placed strong reliance on a number of Circulars on

the point, issued by the Department of Revenue, Ministry of

Finance, Govt. of India, clarifying that with the insertion of

new Section 11BB of the Act, the department had become

liable to pay interest under the said Section if the refund

applications were not processed within three months from

the date of receipt of refund applications.

2 2009 (243) E.L.T. A27 (S.C.).

3 2004 (170) E.L.T. 4

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7. Mr. Arijit Prasad, learned counsel appearing for the revenue,

on the other hand, submitted that since in the present cases

no refunds were sanctioned under Section 11B of the Act, the

provisions of Section 11BB of the Act were not attracted. In

the alternative, it was submitted that the refund orders having

been sanctioned within three months of the passing of orders

by the appellate authority, interest under the said Section

was not payable.

8. Before evaluating the rival contentions, it would be necessary

to refer to the relevant provisions of the Act. Section 11B of

the Act deals with claims for refund of duty. Relevant portion

thereof reads as under:

"11B.Claim for refund of duty.-(1) Any person

claiming refund of any duty of excise and interest, if

any, paid on such duty may make an application for

refund of such duty and interest if any, paid on such

duty to the Assistant Commissioner of Central Excise

or Deputy Commissioner of Central Excise before

the expiry of one year from the relevant date in such

form and manner as may be prescribed and the

application shall be accompanied by such

documentary or other evidence including the

documents referred to in section 12A as the

applicant may furnish to establish that the amount of

duty of excise and interest, if any, paid on such duty

in relation to which such refund is claimed was

collected from or paid by him and the incidence of

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such duty and interest if any, paid on such duty had

not been passed on by him to any other person:

Provided that where an application for refund has

been made before the commencement of the Central

Excises and Customs Laws (Amendment) Act, 1991,

such application shall be deemed to have been

made under this sub-section as amended by the Act

and the same shall be dealt with in accordance with

the provisions of sub-section (2) as substituted by

that Act:

Provided further that the limitation of one year shall

not apply where any duty has been paid under

protest.

(2) If, on receipt of any such application, the

Assistant Commissioner of Central Excise or Deputy

Commissioner of Central Excise is satisfied that the

whole or any part of the duty of excise and interest, if

any, paid on such duty paid by the applicant is

refundable, he may make an order accordingly and

the 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 of excise as

determined by the Assistant Commissioner of

Central Excise or Deputy Commissioner of Central

Excise under the foregoing provisions of this sub-

section shall, instead of being credited to the Fund,

be paid to the applicant, if such amount is relatable

to-----

(a) rebate of duty of excise on

excisable goods exported out of

India or on excisable materials

used in the manufacture of goods

which are exported out of India;

(b) unspent advance deposits lying in

balance in the applicant's current

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account maintained with the

Commissioner of Central Excise;

(c) refund of credit of duty paid on

excisable goods used as inputs in

accordance with the rules made,

or any notification issued, under

this Act;

(d) the duty of excise and interest, if

any, paid on such duty paid by the

manufacturer, if he had not passed

on the incidence of such duty and

interest, if any, paid on such duty

to any other person;

(e) the duty of excise and interest, if

any, paid on such duty borne by

the buyer, if he had not passed on

the incidence of such duty and

interest, if any, paid on such duty

to any other person;

(f) the duty of excise and interest, if

any, paid on such duty borne by

any other such class of applicants

as the Central Government may,

by notification in the Official

Gazette, specify :

Provided further that no notification under clause (f)

of the first proviso shall be issued unless in the

opinion of the Central Government, the incidence of

duty and interest, if any, paid on such duty has not

been passed on by the persons concerned to any

other person.

(3) Notwithstanding anything to the contrary

contained in any judgment, decree, order or

direction of the Appellate Tribunal of any Court in

any other provision of this Act or the rules made

thereunder or any other law for the time being in

9

force, no refund shall be made except as provided in

sub-section (2).

(4) .................................................................

(5) ................................................................"

Section 11BB, the pivotal provision, reads thus:

"11BB. Interest on delayed refunds.-

If any duty ordered to be refunded under sub-

section (2) of section 11B to any applicant is not

refunded within three months from the date of

receipt of application under sub-section (1) of that

section, there shall be paid to that applicant interest

at such rate, not below five per cent and not

exceeding thirty per cent per annum as is for the

time being fixed by the Central Government, by

Notification in the Official Gazette, on such duty from

the date immediately after the expiry of three

months from the date of receipt of such application

till the date of refund of such duty :

Provided that where any duty ordered to be

refunded under sub-section (2) of section 11B in

respect of an application under sub-section (1) of

that section made before the date on which the

Finance Bill, 1995 receives the assent of the

President, is not refunded within three months from

such date, there shall be paid to the applicant

interest under this section from the date immediately

after three months from such date, till the date of

refund of such duty.

Explanation : Where any order of refund is made by

the Commissioner (Appeals), Appellate Tribunal or

any Court against an order of the Assistant

Commissioner of Central Excise, under sub-section

(2) of section 11B, the order passed by the

Commissioner (Appeals), Appellate Tribunal or, as

the case may be, by the Court shall be deemed to be

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an order passed under the said sub-section (2) for

the purposes of this section."

9. It is manifest from the afore-extracted provisions that Section

11BB of the Act comes into play only after an order for refund

has been made under Section 11B of the Act. Section 11BB of

the Act lays down that in case any duty paid is found

refundable and if the duty is not refunded within a period of

three months from the date of receipt of the application to be

submitted under sub-section (1) of Section 11B of the Act,

then the applicant shall be paid interest at such rate, as may

be fixed by the Central Government, on expiry of a period of

three months from the date of receipt of the application. The

Explanation appearing below Proviso to Section 11BB

introduces a deeming fiction that where the order for refund

of duty is not made by the Assistant Commissioner of Central

Excise or Deputy Commissioner of Central Excise but by an

Appellate Authority or the Court, then for the purpose of this

Section the order made by such higher Appellate Authority

or by the Court shall be deemed to be an order made under

sub-section (2) of Section 11B of the Act. It is clear that the

Explanation has nothing to do with the postponement of the

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date from which interest becomes payable under Section

11BB of the Act. Manifestly, interest under Section 11BB of the

Act becomes payable, if on an expiry of a period of three

months from the date of receipt of the application for refund,

the amount claimed is still not refunded. Thus, the only

interpretation of Section 11BB that can be arrived at is that

interest under the said Section becomes payable on the

expiry of a period of three months from the date of receipt of

the application under Sub-section (1) of Section 11B of the Act

and that the said Explanation does not have any bearing or

connection with the date from which interest under Section

11BB of the Act becomes payable.

10. It is a well settled proposition of law that a fiscal legislation

has to be construed strictly and one has to look merely at

what is said in the relevant provision; there is nothing to be

read in; nothing to be implied and there is no room for any

intendment. (See: Cape Brandy Syndicate Vs. Inland

Revenue Commissioners4 and Ajmera Housing Corporation

& Anr. Vs. Commissioner of Income Tax5.).

4 [1921] 1 K.B. 64

5 (2010) 8 SCC 739

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11. At this juncture, it would be apposite to extract a Circular

dated 1st October 2002, issued by the Central Board of Excise

& Customs, New Delhi, wherein referring to its earlier

Circular dated 2nd June 1998, whereby a direction was issued

to fix responsibility for not disposing of the refund/rebate

claims within three months from the date of receipt of

application, the Board has reiterated its earlier stand on the

applicability of Section 11BB of the Act. Significantly, the

Board has stressed that the provisions of Section 11BB of the

Act are attracted "automatically" for any refund sanctioned

beyond a period of three months. The Circular reads thus:

"Circular No.670/61/2002-CX, dated 1-10-2002

F.No.268/51/2002-CX.8

Government of India

Ministry of Finance (Department of Revenue)

Central Board of Excise & Customs, New Delhi

Subject : Non-payment of interest in refund/rebate cases which are

sanctioned beyond three months of filing - regarding

I am directed to invite your attention to provisions of

section 11BB of Central Excise Act, 1944 that wherever the

refund/rebate claim is sanctioned beyond the prescribed

period of three months of filing of the claim, the interest

thereon shall be paid to the applicant at the notified rate.

Board has been receiving a large number of

representations from claimants to say that interest due to

them on sanction of refund/rebate claims beyond a period

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of three months has not been granted by Central Excise

formations. On perusal of the reports received from field

formations on such representations, it has been observed

that in majority of the cases, no reason is cited. Wherever

reasons are given, these are found to be very vague and

unconvincing. In one case of consequential refund, the

jurisdictional Central Excise officers had taken the view that

since the Tribunal had in its order not directed for payment

of interest, no interest needs to be paid.

2. In this connection, Board would like to stress that the

provisions of section 11BB of Central Excise Act, 1944 are

attracted automatically for any refund sanctioned beyond a

period of three months. The jurisdictional Central Excise

Officers are not required to wait for instructions from any

superior officers or to look for instructions in the orders of

higher appellate authority for grant of interest.

Simultaneously, Board would like to draw attention to

Circular No.398/31/98-CX, dated 2-6-98 [1998 (100) E.L.T.

T16] wherein Board has directed that responsibility should

be fixed for not disposing of the refund/rebate claims within

three months from the date of receipt of application.

Accordingly, jurisdictional Commissioners may devise a

suitable monitoring mechanism to ensure timely disposal of

refund/rebate claims. Whereas all necessary action should

be taken to ensure that no interest liability is attracted,

should the liability arise, the legal provision for the

payment of interest should be scrupulously followed."

(Emphasis supplied)

12. Thus, ever since Section 11BB was inserted in the Act with

effect from 26th May 1995, the department has maintained a

consistent stand about its interpretation. Explaining the

intent, import and the manner in which it is to be

implemented, the Circulars clearly state that the relevant

date in this regard is the expiry of three months from the date

of receipt of the application under Section 11B(1) of the Act.

14 13. We, thus find substance in the contention of learned counsel

for the assessee that in fact the issue stands concluded by the

decision of this Court in U.P. Twiga Fiber Glass Ltd. (supra).

In the said case, while dismissing the special leave petition

filed by the revenue and putting its seal of approval on the

decision of the Allahabad High Court, this Court had

observed as under:

"Heard both the parties.

In our view the law laid down by the Rajasthan

High Court succinctly in the case of J.K. Cement Works

v. Assistant Commissioner of Central Excise & Customs

reported in 2004 (170) E.L.T. 4 vide Para 33:

"A close reading of Section 11BB, which

now governs the question relating to payment

of interest on belated payment of interest,

makes it clear that relevant date for the

purpose of determining the liability to pay

interest is not the determination under sub-

section (2) of Section 11B to refund the amount

to the applicant and not to be transferred to the

Consumer Welfare Fund but the relevant date

is to be determined with reference to date of

application laying claim to refund. The non-

payment of refund to the applicant claimant

within three months from the date of such

application or in the case governed by proviso

to Section 11BB, non-payment within three

months from the date of the commencement of

Section 11BB brings in the starting point of

liability to pay interest, notwithstanding the

date on which decision has been rendered by

the competent authority as to whether the

15

amount is to be transferred to Welfare Fund or

to be paid to the applicant needs no

interference."

The special leave petition is dismissed. No

costs."

14. At this stage, reference may be made to the decision of this

Court in Shreeji Colour Chem Industries (supra), relied

upon by the Delhi High Court. It is evident from a bare

reading of the decision that insofar as the reckoning of the

period for the purpose of payment of interest under Section

11BB of the Act is concerned, emphasis has been laid on the

date of receipt of application for refund. In that case, having

noted that application by the assessee requesting for refund,

was filed before the Assistant Commissioner on 12th January

2004, the Court directed payment of Statutory interest under

the said Section from 12th April 2004 i.e. after the expiry of a

period of three months from the date of receipt of the

application. Thus, the said decision is of no avail to the

revenue.

15. In view of the above analysis, our answer to the

question formulated in para (1) supra is that the liability of

the revenue to pay interest under Section 11BB of the Act

16

commences from the date of expiry of three months from the

date of receipt of application for refund under Section 11B(1)

of the Act and not on the expiry of the said period from the

date on which order of refund is made.

16. As a sequitur, C.A.No.6823 of 2010, filed by the

assessee is allowed and C.A.Nos.7637/2009 and 3088/2010,

preferred by the revenue are dismissed. The jurisdictional

Excise officers shall now determine the amount of interest

payable to the assessees in these appeals, under Section

11BB of the Act, on the basis of the legal position, explained

above. The amount(s), if any, so worked out, shall be paid

within eight weeks from today.

17. However, on the facts and in the circumstances of the

cases, there will be no order as to costs.

. ..........................................J.

(D.K. JAIN)

............................................J.

(ANIL R. DAVE)

NEW DELHI;

OCTOBER 21, 2011.

R.S.

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