2017 (4) TMI 1252 - HC - Central Excise

Interest on delayed refund - whether the tribunal is justified in rejecting the claim of interest on the amount refunded on the ground that there is no provision for paying interest on such amount? - Held that - the amount which was illegally confiscated by the Revenue and was ultimately refunded the assessee-appellant is entitled to interest and that the department is under obligation to pay the same - appeal allowed - decided in favor of appellant.

Summary

Issues:
- Whether the tribunal was justified in rejecting the claim of interest on the refunded amount?

Analysis:
The judgment primarily revolves around the tribunal's decision to reject the claim of interest on the amount refunded to the appellant. The appellant had Indian currency seized in 2004, which was later confiscated. Upon challenging the confiscation order, the tribunal ruled in favor of the appellant, leading to the refund of the seized currency without interest. However, it was revealed that the Revenue had deposited the currency in a fixed deposit and earned interest on it, which was not refunded to the appellant. The court emphasized the principle that the government cannot enrich itself at the expense of others and cited the case law to support the obligation to refund any amount retained by the Revenue with interest when found to be refundable. The court referred to the case of Union of India through Director of Income Tax Vs. TATA Chemicals Limited, where it was established that the Revenue must refund illegally collected amounts with interest since they retained and benefited from the money deposited. The court held that the absence of an express statutory provision for interest payment does not absolve the Revenue from the obligation to refund money received and retained without right, which inherently includes the payment of interest.

The court, relying on the Supreme Court's decision, concluded that the appellant is entitled to interest on the illegally confiscated amount that was eventually refunded. Consequently, the department was mandated to pay interest on the confiscated amount for the entire period it remained in the Revenue's custody. The judgment was delivered in favor of the appellant, directing the Revenue to pay the accrued interest on the confiscated amount. The appeal was allowed based on the court's determination that the appellant is entitled to interest on the wrongfully confiscated and subsequently refunded amount.