M/S.3E Infotech vs. Assistant Commissioner Of

Held

The Court held that the respondent is liable to pay interest on the refund of Rs. 4,39,686/-. The reasoning was that the petitioner was dragged into needless litigation and faced significant delays in receiving the refund for this amount, only securing it after the High Court's order which specifically addressed the limitation issue under Section 11B. The Court found no difficulty in accepting the petitioner's contention for this portion of the refund. The interest was directed to be paid at 6% per annum from the date the request was made until the date of actual refund, within four weeks. Regarding the refund of Rs. 5,32,772/-, the Court sustained the respondent's stand. It reasoned that there was no unlawful collection by the department, as the petitioner had remitted the amount due to their own mistake. Once the request for refund was made, it was considered expeditiously, and the refund was processed. Therefore, the petitioner's claim for interest on this amount was rejected.

Facts

M/s. 3E Infotech (the petitioner) paid Rs. 9,72,458/- as service tax on software exports during 2015-16, later realizing it was paid under a mistaken impression. They applied for a refund on 01.07.2016. The respondent, Assistant Commissioner of CGST & Central Excise, sanctioned a refund of Rs. 5,32,772/- but rejected the claim for the balance Rs. 4,39,686/- as time-barred. This rejection was upheld by the appellate authority and the CESTAT. The petitioner's appeal to the Madras High Court (CMA No. 601 of 2018) resulted in a remand order on 28.06.2018, holding that Section 11B applications cannot be rejected solely on limitation grounds. Subsequently, the respondent sanctioned the refund of Rs. 4,39,686/-. The petitioner then sought interest on the delayed refund of both amounts via letters dated 09.11.2018 and 06.12.2018, which were not acted upon, leading to the present writ petition.

Key Issues

1. Whether the respondent is liable to pay interest on the delayed refund of Rs. 4,39,686/-, considering the petitioner was forced into litigation to secure this amount after the High Court's intervention which set aside the limitation bar under Section 11B of the Act. Petitioner's arguments: The petitioner contended that since the amount was wrongfully withheld and they had to pursue lengthy legal recourse, including an appeal to the High Court, the respondent is liable to pay interest on the delayed refund. They relied on several High Court and Supreme Court decisions concerning interest on delayed refunds. Respondent's arguments: The respondent did not explicitly argue against paying interest on the Rs. 4,39,686/- in the provided text, but their counter-affidavit was considered. For the Rs. 5,32,772/- refund, the respondent's stand was that there was no unlawful collection, as the petitioner had remitted the amount themselves due to a mistake, and the refund was expeditiously processed once the request was made.