2006 (1) TMI 352 - AT - Customs

Summary

Issues:
- Appeal against the Order-in-Appeal awarding interest on refund claim after 3 months.
- Eligibility for interest on excess duty refund prior to the enactment of Section 27A of the Customs Act, 1962.

Analysis:
1. The appeal was filed by the Revenue challenging the Order-in-Appeal granting interest to the respondents on their refund claim after 3 months from the date of filing the claim. The respondents filed a refund claim on 10-4-1989 due to the excess duty paid on imported machinery. The Commissioner (Appeals) allowed the appeal, leading to the refund of the excess duty on 9-6-2004 without interest, prompting this appeal by the Revenue.

2. The key issue was the eligibility of the respondents for interest on the excess duty refund prior to the enactment of Section 27A of the Customs Act, 1962. The Department argued that interest could only apply from 26-8-1995, the date of the provision's enactment, citing a Rajasthan High Court decision. In contrast, the respondents contended that the retained excess amount was eligible for interest from the date of the refund claim, supported by a Calcutta High Court ruling.

3. The Tribunal examined the provisions of Section 27A and noted that interest on delayed refunds was introduced by the Finance Act, 1995, receiving presidential assent on 26-5-1995. Before this insertion, there was no provision for interest on delayed refunds. Therefore, any interest payable to the respondents would fall under Section 27A, effective from 26-8-1995.

4. Referring to the Rajasthan High Court's interpretation of Section 11BB of the Central Excise Act, the Tribunal highlighted that interest liability arises from the date of the President's assent to the Finance Bill, 1995, for delayed refunds. As the provisions of Section 11BB and Section 27A are similar, interest in this case would be payable from 26-8-95 until the refund payment date, calculated based on notified interest rates during the period.

5. Consequently, the Tribunal directed the authorities to pay interest to the respondents from 26-8-95 to 9-6-2004 within 4 weeks of the Order. The appeal was disposed of accordingly, along with the Cross Objection.