CESTAT Allows Interest On Delay In Refund Of Excess Reversal Of CENVAT Credit

The bench of Judicial Member Ramesh Nair dismissed the contention of the revenue department that since the assessee- Reliance Industries, was entitled to adjust the excess amount by taking credit suo moto under the CENVAT Credit Rules, 2004, which it had failed to do so, it was not entitled to interest.

The Tribunal held that since the revenue department had sanctioned the refund claim of the assessee under Section 11B of the Central Excise Act, 1944, it could not give a different treatment by refusing to grant interest under Section 11 BB, which is consequential to the refund made under Section 11B.

The appellant- Reliance Industries Ltd., reversed CENVAT credit in excess of the amount required to be reversed in terms of Rule 6(3) of the CENVAT Credit Rules, 2004. The appellant applied for refund of the excess amount reversed, which was sanctioned by the Adjudicating Authority. The Adjudicating Authority, however, did not grant interest on such sanctioned refund claim, against which the assessee filed an appeal before the Commissioner (Appeals).

The Commissioner (Appeals) held that since the assessee had failed to adjust the excess amount by taking credit suo moto, in terms of Rule 6(3A)(f), it was not entitled to interest. The appellant challenged the order of the Commissioner (Appeals) by filing an appeal before the CESTAT.

The appellant Reliance Industries submitted before the Tribunal that any claim of refund related to MODVAT/CENVAT is governed by Section 11B of the Central Excise Act, 1944. The appellant argued that duty of excise includes CENVAT credit and therefore, the refund of CENVAT credit is also governed by Section 11 B. Thus, it contended that since the refund claim of the appellant was governed by Section 11B, the consequential interest, as provided under Section 11 BB, was also available to the appellant.

The revenue department averred that since the appellant was entitled to take suo moto credit, which it had failed to take, the department cannot be burdened for payment of interest on refund of excess reversal of CENVAT credit.

Noting that the appellant was granted refund of excess reversal of CENVAT credit made by it, the CESTAT observed that the revenue department had undisputedly sanctioned the refund in cash under Section 11B of the Central Excise Act, 1944. Thus, the Tribunal held that different treatment cannot be given for grant of interest which is consequential to the refund made under Section 11 B.

The CESTAT took into account that there was a delay of more than 2 years in sanctioning the refund claim of the appellant against the application for refund filed by it.

Referring to the decision of the Apex Court in Ranbaxy Laboratories Ltd. versus Union of India (2011), the Tribunal reiterated that the assessee is entitled for interest if the refund is not sanctioned within the stipulated time period of 3 months from the date of the refund application.

Therefore, allowing the appeal, the CESTAT held that the appellant Reliance Industries was entitled to interest on the refund claim sanctioned towards the excess reversal of CENVAT credit made by it.

Case Title: Reliance Industries Ltd. versus C.C.E. & S.T.-Vadodara-ii

Dated: 31.10.2022 (CESTAT Ahmedabad)

Representative for the Appellant: Ms. Dimple Gohil, Advocate

Representative for the Respondent: Mr. Prakash Kumar Singh, Superintendent (AR)

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