Customs - Interest on delayed refund - High Court condemns high-handedness of department - holds interest is payable after expiry of three months from date of claim - Awards additional interest of 9% on interest
By TIOL News Service
BANGALORE, AUG 26, 2015: MANY assessees believe that it is not easy to get refund from the department. Here is another classic example to justify that belief.
On 04.06.1998 the respondent-company had imported certain items and cleared the same on payment of customs duty. Later, the respondent realized the mistake of having deposited the customs duty, as the goods which were imported were exempted from customs duty under Notification dated 02.06.1998. Thus, the respondent-company filed an application on 24.12.1998 under Section 27 of the Act for refund of customs duty amounting to Rs.1,06,74,049/-, which was deposited on 04.06.1998. By order dated 23.10.2001, the Deputy Commissioner, rejected the application for refund of customs duty filed by the respondent-company, stating that the goods imported were not exempted and hence the respondent was not entitled to such refund.
The Commissioner (Appeals) allowed the refund, but on the ground of unjust enrichment, ordered it to be credited to the Consumer Welfare fund. The assessee got favourable order from the CESTAT. The department was unsuccessful before the High Court and Supreme Court. The Supreme Court order is dated 21.02.2011.
Finally, the Assistant Commissioner of Customs, granted refund vide order dated 13.04.2011, but refused to pay interest on the ground that the refund was given within three months from the date of Supreme Court order.
The assessee continued the battle and finally, the Tribunal held that the assessee is entitled to interest from 24.03.1999 to 13.04.2011. Aggrieved by the same, revenue is now before the High Court.
After hearing both sides, the High Court held:
From plain reading of Section 27A, it is clear, that interest would be payable if the amount is not refunded within three months from the date of the application. The rate of interest would vary from 5% to 30% per annum, as may be fixed by the Central Government by Notification from time to time. Explanation immediately after the proviso in the said Section only means that the liability to pay the amount would arise after the order of refund of the amount is finalized, either in appeal or by the Commissioner, Tribunal or the Court, but such liability would be from three months after the date of application. The same cannot be interpreted that the liability to pay interest would be from the date of the order of the Tribunal or the Court, which may be passed in appeal.
While considering a similar case under the Central Excise Act, the Apex Court in Ranbaxy Laboratories Ltd., - 2011-TIOL-105-SC-CX has interpreted under Section 11BB as well as the Explanation of the said Section in the same manner as has been held by the Tribunal. The provisions of Section 11BB of the Central Excise Act, 1944 and Section 27A of the Customs Act are parimateria.
The appellant has been misinterpreting the law, and thereby depriving the respondent from its rightful claim of interest, even after the order for refund of the amount had been made upto the Supreme Court. Not only that, the interest has been denied to the respondent even though the order directing payment of interest was made by the Tribunal on 21.05.2014, which was based on a decision of the Supreme Court.
We are of the opinion that the respondent would be entitled to costs or compensation for the high handedness of the appellant, by initially not refunding the amount for over 12 years, and then refusing to pay the interest even after the order of the Tribunal, and dragging the respondent into litigation up to the High Court, although the matter was fullycovered by the decision of the Apex Court in the case of Ranbaxy Laboratories Ltd.
As such, while holding that no substantial question of law arises in this appeal for determination by this Court, we dismiss this appeal but with the direction that besides the payment of interest from 24.03.1999 (which is three months after the date of application for refund of customs duty filed by the respondent) till the actual date of the payment, which shall be at such rates notified from time to time, the appellant shall further be liable to pay additional interest at the rate of 9% per annum (besides the notified interest) on the amount which is found liable for payment as on 13.04.2011, till its actual payment.
(See 2015-TIOL-1958-HC-KAR-CUS)
