Interest on Excise Duty Refund Under Section 11BB: Lessons from Kanpur Edibles Pvt. Ltd vs Commissioner of Central Excise & CGST

Background and Overview

A recent ruling by CESTAT Allahabad in the matter of Kanpur Edibles Pvt. Ltd Vs Commissioner of Central Excise & CGST has reinforced a critical principle in central excise law — that interest on refund of duty is exclusively governed by Section 11BB of the Central Excise Act, 1944, and cannot be claimed independently by invoking Article 265 of the Constitution or Section 72 of the Indian Contract Act, 1872. The Tribunal upheld the denial of interest on a refund of duty paid under protest, finding that since the refund was sanctioned within the three-month statutory window prescribed under Section 11BB, no interest liability arose.

This decision carries significant practical implications for manufacturers and assessees who deposit duty under protest and later seek refund along with interest, particularly in cases where the underlying dispute spans several years.

Facts of the Case

Nature of Business and Products

Kanpur Edibles Pvt. Ltd. is a manufacturer registered with the Central Excise Department (Registration No. AAECS2988JXM001) engaged in the production of fixed and refined vegetable oils classified under Chapter Headings 1507, 1508, 1511, 1512, 1514, 1515, and 1516 of the First Schedule to the Central Excise Tariff Act, 1985. These oils were exempt from duty under Notification No. 03/2006-CE dated 01.03.2006.

In the course of manufacturing these oils, by-products in the form of fatty acids (classifiable under Chapter Heading 3823) and residues (classifiable under Chapter Heading 1522) were also produced. Until January 2008, duty was being paid on these by-products. Thereafter, the assessee began claiming exemption under Notification No. 89/95-CE dated 18.05.1995.

Revenue's Challenge and Demands

The Revenue disputed the exemption claim and repeatedly issued show cause notices demanding central excise duty on the fatty acids and residues. Accordingly, the assessee deposited duty under protest at the time of clearance of these goods, without recovering the same from buyers or consumers.

For the period prior to January 2014, adjudication orders confirmed the demand. However, on appeal, the Commissioner (Appeals) set aside the demand. Revenue then approached the Tribunal, which decided the issue in favour of the assessee through Final Order Nos. A/70692-70709/2018-EX[DB] dated 27.02.2018, 72736/2018 dated 29.11.2018, and 72794-72795/2018 dated 05.12.2018. These Tribunal orders were accepted by the competent authority, as conveyed vide letter dated 11.11.2024 (acceptance dated 09.08.2024).

Subsequent Period Proceedings Dropped

For the period from October 2013 onwards, fresh demands were raised under Section 11A(7A) of the Central Excise Act across multiple show cause notices, the details of which are as follows:

The Additional Commissioner, vide Order-in-Original Nos. 15/C Ex/Kanpur Edibles/AC/Div KD/20125 and 19/C Ex/Kanpur Edibles/AC/Div KD/20125, both dated 30.03.2025, dropped all these proceedings.

Refund Claim and Its Processing

Filing of Refund Application

Following the dropping of proceedings, the assessee filed a refund claim on 28.04.2025 for Rs. 50,77,948/- covering the period from January 2014 to February 2015. The claim was in respect of duty deposited under protest in connection with demands raised during that period, along with a request for interest on such refund.