CESTAT Grants 6% Interest For Delayed Refund Under Section 11BB: Refund Beyond 3-Month Window Attracts Statutory Interest
Pranav B Prem
The New Delhi Bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT), presided by Dr. Rachna Gupta (Judicial Member), has reiterated that interest on delayed refunds is statutorily mandated under Section 11BB of the Central Excise Act, 1944, if the refund is not granted within three months from the date of the refund application. The Tribunal allowed the appeal filed by Bharat Heavy Electricals Limited (BHEL) and directed the revenue to pay interest at 6% per annum on the delayed refund, in accordance with Notification No. 67/2003 dated 12.09.2003.
Background
The dispute arose from a refund claim of ₹1,56,27,241 filed by BHEL on 06.09.2017, seeking a cash refund of unutilized accumulated CENVAT credit. The claim was initially rejected by the Assistant Commissioner through an order dated 12.07.2018, which was affirmed by the Commissioner (Appeals) on 28.09.2018. However, the rejection was overturned by the Tribunal vide Final Order No. A/51849/2019 dated 26.04.2019, wherein BHEL was held entitled to the refund.
Despite the Tribunal’s order, the revenue did not grant the refund immediately. Instead, a fresh show cause notice dated 04.12.2020 was issued citing seven grounds to again deny the refund. However, those objections were not accepted, and the refund was ultimately sanctioned by the Order-in-Original dated 23.02.2021. Yet, while disbursing the refund amount, no interest under Section 11BB was granted.
Proceedings Before Commissioner (Appeals)
BHEL challenged the denial of interest before the Commissioner (Appeals), who rejected the appeal solely on the ground that the matter was sub judice before the Madhya Pradesh High Court due to a writ petition filed by the department challenging the Tribunal’s 2019 order.
Contentions Before CESTAT
Before the Tribunal, the appellant argued that the High Court had already disposed of the department’s appeal on 23.07.2025 as “Dismissed as Withdrawn.” Therefore, the only basis for the Commissioner (Appeals)'s rejection no longer existed. It was further contended that as per Section 11BB of the Central Excise Act, interest was automatically payable if a refund was delayed beyond three months, irrespective of the pendency of any litigation.
The counsel for the department fairly conceded that Section 11BB mandates payment of interest on delayed refunds, and admitted that Notification No. 67/2003 fixed the applicable interest rate at 6%.
Findings of the Tribunal
Dr. Rachna Gupta noted that Section 11BB provides that if the refund is not processed within three months of the date of application, the applicant becomes statutorily entitled to interest on the refund amount from the expiry of three months until the actual date of refund. The explanation appended to the provision clarifies that if the refund arises from an appellate order, such as one passed by the Tribunal, the date of that appellate order is deemed the date of the refund order under Section 11B(2).
In this case, the refund application was filed on 06.09.2017, and the refund was sanctioned only on 23.02.2021—more than three years later. The Tribunal held that this delay clearly entitled BHEL to interest under Section 11BB. The Tribunal also clarified that Section 11BB provides for an interest rate between 5% and 30%, and the Central Government has, by notification dated 12.09.2003, fixed the rate at 6%.
In light of these findings, the Tribunal held that BHEL was entitled to interest at 6% per annum from the date following the expiry of three months from 06.09.2017 until the actual date of refund disbursement. Accordingly, the appeal was allowed, and the impugned order of the Commissioner (Appeals) was set aside.
Appearance
Counsel for Appellant/ Assessee: Z.U. Alvi
Counsel for Respondent/ Department: Kuldeep Rawat
Cause Title: Bharat Heavy Electricals Limited v. Commissioner of CGST & Central Excise, Bhopal
Case No: Excise Appeal No. 55256 of 2023
Coram: Dr. Rachna Gupta [Judicial Member]
