Interest On Delayed Refund Is Statutorily Mandated After 3 Months: CESTAT Applies 6% Interest U/S 11BB Of Central Excise Act

Section 11BB of the Central Excise Act, 1944 mandates that if a duty refund is not processed within three months from the receipt of an application, the applicant is entitled to interest on the delayed amount. It empowers Central Government to fix rate between 5-30% through notification. Notification 67/2003 validly issued fixing 6% rate.

The Bench of Dr. Rachna Gupta (Judicial Member) has observed that “the refund application was of 06.09.2017 and the order sanctioning the same is dated 23.02.2021 apparently the order of sanction is much beyond the said period of three months. This is sufficient to conclude that the assessee is entitled for interest on the amount of refund claim. However, with effect from the date on which the three months from the date of refund expires till the date of disbursement thereof.”

That assessee/appellant had applied a refund claim for refund in cash of total accumulated Cenvat. On verification of the refund claim, it was observed that there are no provisions for such refund.

Accordingly, Assistant Commissioner issued a Show Cause Notice to the claimant proposing disallowance of the refund claim. After following the procedure of natural justice, the Assistant Commissioner rejected the refund claim. The Commissioner (Appeals) also dismissed the appeal. The appeal against the said order has been allowed vide the Final Order of the Tribunal.

Since the department filed an appeal against the said final order before the Madhya Prasdesh High Court, that the claim was proposed to be rejected vide Show Cause Notice on seven grounds as mentioned in the said show cause notice.

However, the proposal was not accepted, and the amount of refund claim was sanctioned as well as disbursed vide the order-in-original.

Since the interest in terms of Section 11BB of Central Excise Act was not granted while sanctioning the said refund that the appeal was filed before Commissioner (Appeals) who vide the order has dismissed the appeal due to the pendency of Writ Petition.

The assessee contended that the appeal of the department against the final order dated 26.04.2019 before High Court stands already disposed of being “Dismissed as Withdrawn” vide order dated 23.07.2025. Accordingly, the only basis for the order of Commissioner (Appeals) is no more in existence. The assessee is otherwise entitled for the interest in terms of Section 11BB of Central Excise Act.

The Tribunal noted that as per Section 11BB the statute itself entitles the assessee to have interest on the amount refunded in case the said amount is not sanctioned within three months of the refund claim.

The Tribunal further observed that Section 11BB has given a range of such rate which should not be below 5% and should not be exceeding 30% subject to a notification in the official gazette.

The notification dated 12.09.2003 has fixed the said rate at 6%. Resultantly, the assessee entitled for the interest for the period as already mentioned above @ 6%, added the bench.

In view of the above, the Tribunal allowed the appeal.

Case Title: Bharat Heavy Electricals Limited v. Commissioner of CGST & Central Excise, Bhopal

Case Number: Excise Appeal No. 55256 of 2023

Counsel for Appellant/ Assessee: Z.U. Alvi

Counsel for Respondent/ Department: Kuldeep Rawat

Click Here To Read/Download The Order