M/S Smruti Agencies vs. Union Of INDIA

Facts

M/s Five Star Agrico Pvt. Ltd. (the petitioner) filed a writ application challenging an order-in-original dated November 17, 2021, passed by Respondent No. 3. The petitioner sought sanction of interest under Section 11BB of the Central Excise Act, 1944, on a refund of Rs. 39,94,222/- sanctioned under Section 11B of the same Act. This refund was granted pursuant to a previous High Court order dated July 1, 2021. The petitioner manufactures and exports hand tools. The goods manufactured by the petitioner were subject to various exemption notifications under the Central Excise Act, 1944. The impugned order sanctioned the refund but declined to grant interest.

Held

The Court held that the writ applicants are entitled to interest on the refunded amount in accordance with Section 11BB of the Central Excise Act, 1944. The Court relied on the Supreme Court's decision in Ranbaxy Laboratories Ltd. vs. Union of India, which established that the liability of the revenue to pay interest under Section 11BB commences from the date of expiry of three months from the date of receipt of the application for refund under Section 11B(1) of the Act, and not from the date on which the order of refund is made. The Court noted that the Explanation to Section 11BB, which deals with orders made by appellate authorities or courts, does not postpone the date from which interest becomes payable. Consequently, both writ applications were allowed, and Respondent No. 3 was directed to calculate the interest based on the provided charts and complete the exercise within eight weeks.

Key Issues

1. Whether the petitioner is entitled to interest under Section 11BB of the Central Excise Act, 1944, on the refund sanctioned under Section 11B of the Act, when the refund was ordered by the High Court. Petitioner's Contention: The petitioner argued that they are entitled to interest on the sanctioned refund. They relied on the principle that interest should accrue on delayed refunds, especially when the refund is mandated by a court order. Revenue's Contention: The judgment does not explicitly record any specific arguments made by the revenue regarding the entitlement to interest. However, the fact that the impugned order declined interest suggests the revenue's position was against granting it in this specific scenario.