2006 (7) TMI 494 - AT - Customs

Summary

Issues:
- Interpretation of Section 27A of the Customs Act, 1962 regarding the payment of interest on delayed refunds.
- Determination of the starting point for calculating interest on delayed refunds.
- Application of the proviso to Section 27A in cases where refund claims were filed before the enactment of Section 27A.

Analysis:
The appeal before the Appellate Tribunal CESTAT, Bangalore concerned a refund claim application filed by the appellants for the period 1986-1989, seeking interest under Section 27A of the Customs Act, 1962 for a delayed refund. The Tribunal noted that Section 27A was introduced in 1995 to address delays in refund processing by providing for the payment of interest. The key issue was determining the correct starting point for calculating interest on delayed refunds. The Tribunal explained that for cases where refund claims were filed before the enactment of Section 27A, the proviso to Section 27A applies. According to the proviso, interest starts from the date of expiry of three months from the enactment of Section 27A, i.e., 26-8-1995. Therefore, in the present case, interest was deemed payable from 26-8-1995 to 20-8-2002, the date of refund.

The Tribunal examined the legal provisions under Section 27A and emphasized that interest on delayed refunds is triggered if the refund is not granted within three months from the date of the refund claim. The Tribunal clarified that the order of refund, even if issued after a Tribunal's order, is deemed to be an order passed under Section 27(2) for the purposes of Section 27A. This explanation guided the Tribunal's decision on the interest liability start date. Despite the Commissioner (Appeals) holding that interest starts after three months from the Tribunal's order, the Tribunal disagreed, citing the Explanation to Section 27A. The Tribunal set aside the impugned order and allowed the appeal, concluding that interest was payable from 26-8-1995 to 20-8-2002, in line with the proviso to Section 27A.

In summary, the Tribunal's judgment clarified the application of Section 27A in cases of delayed refunds, emphasizing the starting point for calculating interest and the significance of the proviso for cases predating the enactment of Section 27A. The decision highlighted the importance of statutory provisions in determining interest liability on delayed refunds and provided a clear interpretation of the relevant legal framework to resolve the dispute in favor of the appellants.