Authority: Calcutta High Court (High Court at Calcutta)

Order Date: 08 September 2026

Case Overview

  • Parties: Revenue (appellant) vs. M/S Electrosteel Castings Limited (respondent).
  • Nature of Proceeding: Appeal filed by the Revenue under Section 35G of the Central Excise Act, 1944 challenging an interim order dated 04‑07‑2025 passed by the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) directing payment of 9% interest on a service‑tax refund.
  • Background:
  • Electrosteel Castings Ltd, holding a service‑tax registration, executed a turnkey drinking‑water project for the Kerala Water Authority starting 03‑10‑2006.
  • It paid service tax during the dispute period, later being advised (31‑10‑2011) that pipeline laying did not constitute taxable construction services.
  • Two refund claims were filed under Section 11B of the Central Excise Act: Rs.15,23,691 on 05‑01‑2012 and Rs.2,05,01,047 on 20‑03‑2012.
  • The second claim was returned as time‑barred on 26‑03‑2012; the first was rejected on 18‑10‑2012.
  • Appeals to the Commissioner (Appeals) were dismissed on 30‑12‑2013.
  • CESTAT set aside those rejections on 09‑08‑2024 and ordered refund sanction within one month.
  • The Assistant Commissioner sanctioned the principal refund of Rs.2,25,24,738 on 06‑01‑2025 without interest.
  • The Revenue appealed the sanction order; the respondent withdrew that appeal on 21‑07‑2025.
  • CESTAT, on 04‑07‑2025, issued interim order 01(M)/2025 directing payment of 9% interest, calculated from three months after the original filing dates (05‑01‑2012 and 20‑03‑2012).
  • Issues Raised:

1. Whether interest is payable when the refund is sanctioned within three months of receipt of complete documents.

2. Whether CESTAT was justified in awarding 9% interest.

3. Whether the 9% rate contravenes Notification No. 24/2014‑CE (NT).

4. Whether the Revenue’s appeal under Section 35G is maintainable against a CESTAT order passed under Rule 41.

5. Whether the Tribunal exceeded its jurisdiction or acted contrary to procedural rules.

6. Whether the respondent suppressed facts to gain advantage.

  • Counsel Submissions (Revenue): Asserted CESTAT lacked jurisdiction to award interest via Rule 41; argued the refund was sanctioned within the statutory three‑month window; claimed 9% rate exceeds statutory 6%; highlighted procedural improprieties.
  • Counsel Submissions (Respondent): Contended the appeal under Section 35G is not maintainable; emphasized that orders under Rule 41 are not “orders in appeal”; argued interest is statutory when refund is delayed beyond three months from original application; cited Supreme Court decisions (Ranbaxy, JSW Steel) supporting this view; maintained that the 9% rate is compensatory for a mistake‑of‑law refund.

Final Outcome

  • The Court held the Revenue’s appeal under Section 35G to be ex‑facie non‑maintainable and dismissed it.
  • It affirmed that interest on the refund is payable, to be calculated from the expiry of three months after the original 2012 applications, and upheld the 9% per annum rate as compensatory, not contrary to Notification No. 24/2014‑CE.
  • The Tribunal’s exercise of inherent powers under Rule 41 to direct payment of interest was deemed within jurisdiction.

Conclusion

  • All substantial questions of law were answered in favour of the assessee, confirming interest liability and the Tribunal’s authority.
  • No order as to costs was made.
  • Provision for an urgent certified copy was noted.

Topics: Refund Interest, Tax Litigation, Tribunal Jurisdiction