Detailed Case Analysis: GAIL (India) Limited & Ors. v. Union of India & Ors. (W.P.(C) No. 3586/24) – Gauhati High Court

Date of Order: 26th July 2024

Judgment Delivered by

Justice Devashis Baruah

FACTUAL MATRIX

This writ petition was filed by GAIL (India) Limited along with two other petitioners, challenging the Union of India and four other respondents over the non-payment of interest on delayed excise duty refund. The refund in question, amounting to Rs. 4,48,92,856, was due to the petitioners as per the provisions of Notification No. 33/99-CE, dated 8th July 1999. The petitioners had claimed the right to interest under Section 11BB of the Central Excise Act, 1944 on the delayed refund.

a)Amount of Refund Due: Rs. 4,48,92,856

b)Basis of Refund: Notification No. 33/99-CE dated 8th July 1999

The Assistant Commissioner had previously rejected the petitioners' claim for interest on the delayed excise duty refund through Order No. 02/REF/GAIL/ACD/2024-25, dated 25th May 2024. As a result, the petitioners filed this writ petition, seeking directions for the release of the interest amount on the delayed refund, as per the legal provisions and previous rulings.

ARGUMENTS ADVANCED BY THE PETITIONER

The petitioners, represented by Mr. S Mitra, advanced the following arguments:

1)Previous Judgments Supporting the Claim for Interest:

 a)The petitioners pointed out that previous decisions of the Gauhati High Court had already adjudicated the issue of interest on delayed refunds under similar circumstances. In particular, the Division Bench of this Court in the case of Amalgamated Plantations Pvt. Ltd. v. Union of India, reported in 2016 38 GSTR 395, had explicitly held that an assessee is entitled to interest on delayed excise duty refunds under Section 11BB of the Central Excise Act, 1944.

b)The Court had also ruled that Section 11BB does not exclude claims arising from refunds under Notification No. 33/99-CE.

2)Willingness to Reimburse Interest if Supreme Court Rules in Favor of the Revenue:

a)The petitioners further submitted that they were not adverse to providing an undertaking to the effect that if the Supreme Court rules in favor of the revenue in the ongoing review, they would reimburse the interest paid under the current order.

Legal Precedents and Court Orders:

a)The petitioners highlighted that the Gauhati High Court in past cases, such as Pan Parag India Ltd. (W.P. No. 4772/2016), Dharampal Satyapal Ltd. (W.P. No. 5434/2013), and others, had granted similar relief, directing the revenue authorities to pay interest on delayed refunds, subject to the outcome of the ongoing Special Leave Petition (SLP) No. 16322/2018 pending before the Supreme Court.

b)The petitioners referred to the orders in these cases, where the Union of India had withdrawn appeals with the understanding that the outcome of the Supreme Court’s decision on the issue of interest would be binding on both parties.

ARGUMENTS ADVANCED BY THE RESPONDENT

The Union of India, represented by Mr. S.C. Keyal, advanced the following counter-arguments:

 1) Pending Supreme Court Review:

a)The respondents argued that the issue of interest on delayed excise duty refunds was pending before the Supreme Court in SLP No. 16322/2018. In light of this, they contended that no payment of interest should be ordered until the Supreme Court reaches a final decision on the matter.

2)Preceding Court Orders are Subject to Outcome of SLP:

a) The respondents emphasized that the petitioners’ claims for interest must be contingent upon the final decision of the Supreme Court in the pending SLP, as the issue of law involved remains unresolved at the highest judicial forum.

COURT FINDINGS

The Gauhati High Court, led by Justice Devashis Baruah, examined the arguments of both parties in detail and passed the following observations and orders:

1)Acknowledgment of Legal Precedents:

The Court observed that the issue of granting interest on delayed refunds was not new and had been addressed in several precedents by the Gauhati High Court. Specifically, it acknowledged the judgment in Amalgamated Plantations Pvt. Ltd. and subsequent cases where the Court had consistently upheld the claim for interest under Section 11BB of the Central Excise Act.

2)The Petitioners' Claim:

The Court noted that the petitioners were entitled to a refund of excise duty as per Notification No. 33/99-CE and that their claim for interest was valid under Section 11BB of the Act. The Court also noted that the respondents had not raised any new objections regarding the entitlement of the petitioners to the interest, other than the pending SLP before the Supreme Court.

3)Supreme Court's Pending Review (SLP No. 16322/2018):

The Court acknowledged that the issue of whether interest is payable on delayed refunds was pending before the Supreme Court in SLP No. 16322/2018. Despite this, the High Court held that in view of the consistent decisions in favor of the petitioners, the payment of interest could not be indefinitely delayed.

4)Condition for Payment of Interest:

The Court directed that the Assistant Commissioner, Central GST Division Dibrugarh, should verify the interest amount due to the petitioners and release the payment within two months from the date of receipt of the certified copy of the order.

However, the payment of interest was subject to the condition that the petitioners would provide an undertaking agreeing to reimburse the interest amount if the Supreme Court ultimately ruled in favor of the Revenue in the SLP.

Undertaking Requirement:

The petitioners were directed to submit an undertaking stating that if the Supreme Court rules against their claim for interest, they would reimburse the amount of interest paid by the revenue authorities.

Final Disposition of the Case:

The Court disposed of the writ petition with the following final directions:

a)The interest amount on the delayed excise duty refund should be verified and released within two months by the Assistant Commissioner, Central GST Division Dibrugarh.

b)The petitioners must submit an undertaking regarding reimbursement of the interest if the SLP is decided in favor of the revenue.

c)The Court’s order was subject to the outcome of the Supreme Court in SLP No. 16322/2018.

CONCLUSION

The Gauhati High Court in this case directed the Revenue Department to pay the interest on the delayed excise duty refund to GAIL (India) Limited and the other petitioners, with the understanding that the payment would be contingent upon the outcome of the Special Leave Petition (SLP) pending before the Supreme Court. The Court took into account previous judgments that had already established the petitioners' entitlement to interest under Section 11BB of the Central Excise Act, 1944 and acknowledged the ongoing litigation regarding the matter at the Supreme Court.

Key points of the decision:

a)Payment of Interest: The Assistant Commissioner is directed to release the interest within two months of receiving the certified copy of the order.

b)Undertaking: The petitioners must provide an undertaking to reimburse the interest if the Supreme Court rules against them in the pending SLP.

c)Contingent Order: The entire order is contingent upon the decision of the Supreme Court in the ongoing SLP No. 16322/2018.