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Section 11BB of Central Excise Tax does not distinguish between intentional and unintentional delay: Bombay High Court

Once there is delay in payment of refund within three months from the date of receipt of application, rigour of section 11BB sets in and payment of interest on the delayed refund becomes obligatory. It follows automatically; as a matter of law being a mandate of the statute. A division bench comprising of Ujjal Bhuyan J and Milind N Jadhav J, while adjudicating the matter in Qualcomm India Private Limited Vs. Union of India and others; [WRIT PETITION NO.1775 OF 2020] dealt with tax exemption by a company.

Petitioner is a company incorporated under the Companies Act, 1956 having its registered office at Bandra Kurla Complex, Mumbai. Petitioner is engaged in the business of providing support services primarily to its foreign affiliates. It is stated that services provided by the petitioner qualified as export of service under the erstwhile Export of Service Rules, 2006 as well as under rule 6A of the Service Tax Rules, 1994 read with rule 3 of the Place of Provision of Services Rules, 2012. Hence, petitioner did not pay any service tax on the output services so exported. This resulted into accumulation of CENVAT credit of service tax paid on input services. Several show cause notices were issued to the petitioner by the Assistant Commissioner i.e., respondent No.3 to show cause as to why the refund claims of the petitioner should not be rejected primarily on the ground that the input services did not have any nexus with the output services and thus were not eligible for refund. Responding to such show cause notices, petitioner submitted detailed replies enclosing therewith the requisite documents. Refund sanctioning authority passed orders in original in respect of the refund claims made by the petitioner partially sanctioning the refund amount and partially rejecting the refund amount. Against the orders partially rejecting the refund claim, petitioner preferred appeals before the appellate authority. Learned counsel for the respondent stated that there was no intentional delay in granting the refund to the petitioner. Therefore, question of payment of interest would not arise. As such, the writ petition should be dismissed.

The Court upon considering the aforesaid facts, upheld the petition and stated that: Section 11BB does not distinguish delay which is intentional and delay which is unintentional. Once there is delay in payment of refund within three months from the date of receipt of application, rigour of section 11BB sets in and payment of interest on the delayed refund becomes obligatory. It follows automatically; as a matter of law being a mandate of the statute. Non-granting of interest in such a case would amount to failure to discharge statutory duty / obligation by the refund sanctioning authority for which the aggrieved claimant can seek a writ of mandamus from the Writ Court under Article 226 of the Indian Constitution. Thus in the light of the discussions made above, the writ petition succeeds. Petitioner would be entitled to interest under section 11BB of the Central Excise Act, 1944 on the amounts refunded to it. Respondent Nos.2 and 3 shall work out the interest amount payable to the petitioner in respect of the refund claims for the relevant periods which shall be paid to the petitioner within three months from the date of receipt of a copy of this judgment and order.”

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