2004 (2) TMI 651 - HC - Customs

Refund of customs duty - Interest on delayed refund - business of importing exporting and trading in various goods - HELD THAT - There is no dispute about the fact that the petitioners had made the original application for refund of excess customs duty (65% less 45%) on 31.10.1995 and therefore the petitioners have claimed interest for the period from 31.1.1996onwards. Even in respect of the petitioner s claim for interest for delayed payment of refund amount of Rs. 14, 83, 303/- the respondent authorities have paid the petitioners interest for the period from 31.1.1996 till the date of payment of the said refund amount which worked out to Rs. 9, 56, 729/- and which was paid to the petitioners on12.7.2000. There is no reason for the respondent authorities to justifiably refuse payment of interest for the delay in payment of refund amount of Rs. 5, 21, 99/- which was ultimately sanctioned by the Commissioner (Appeals) by his order dated 26.2.2001 and actually paid to the petitioners on 30.6.2001. In the facts of the instant case while the Deputy Commissioner had determined the refund amount of Rs. 14, 83, 303/- the appellate authority allowed the additional refund amount of Rs.5, 21, 99/- and therefore there is no justification for denying the petitioners interest of the delay in payment of the said amount of Rs. 5, 21, 99/- for the period from the date of expiry of three months from 31.10.1995 when the petitioners had made the application for refund of the entire amount of Rs. 20, 72, 23/- out of which Rs.14, 83, 303/- was directed to be refunded by the Deputy Commissioner s order dated 6.6.2000 and the balance amount of Rs. 5, 21, 99/- was ordered to be refunded by the Appellate Commissioner s order dated 26.2.2001. Thus the petition is allowed. The respondents are directed to pay the petitioners interest at the rates applicable in accordance with the notifications issued u/s 27A of the Customs Act 1962 on the amount of Rs. 5, 21, 99/- for the period from the date of expiry of three months from the date on which the petitioners made the refund application till the date of payment of refund of the said amount i.e. for the period from 31.1.199 till30.6.2001.

Summary

Issues Involved:
1. Entitlement to refund of customs duty.
2. Entitlement to interest on delayed refund.

Summary:

1. Entitlement to Refund of Customs Duty:
The petitioner-company, engaged in importing and trading goods, imported holograms in 1995 for election identity cards. Initially, the Customs Department assessed the holograms under Chapter 39 at 65% duty, leading to a higher provisional duty payment. The petitioner filed a Special Civil Application, and the Court directed a provisional assessment u/s 18 of the Customs Act. The customs authorities later reclassified the holograms under Chapter 49 with a 45% duty rate, finalizing the assessment and entitling the petitioner to a refund of the differential duty. The Deputy Commissioner sanctioned a partial refund but credited Rs. 5,21,099/- to the Consumer Welfare Fund, citing Section 27(2) of the Act. However, the Commissioner of Customs (Appeals) reversed this decision, stating the petitioners did not pass on the duty burden to the buyer, thus entitling them to the full refund.

2. Entitlement to Interest on Delayed Refund:
The petitioners sought interest on the delayed refund from 31.1.1996 to 30.6.2001. The respondents argued that the interest should only be calculated from the date of the appellate order. The Court referred to Sections 27 and 27A of the Customs Act, emphasizing that interest is payable from three months after the refund application date. The petitioners had applied for a refund on 31.10.1995, and thus, interest was due from 31.1.1996. The Court noted departmental instructions supporting this interpretation, asserting that interest should be paid on the amount finally decided to be refunded from the expiry of three months from the refund application date.

Judgment:
The Court directed the respondents to pay interest on Rs. 5,21,099/- from 31.1.1996 to 30.6.2001 at the applicable rates per Section 27A of the Customs Act. The calculation and payment of interest were to be completed within two months from the receipt of the Court's writ. Failure to comply would allow the petitioners to claim interest on interest. The rule was made absolute with no order as to costs.