2013 (4) TMI 282 - HC - Customs

Interest on refund excess sale proceeds - Refund of balance after adjustment of expenses and charges U/s 150 of the Customs Act, 1962 - Held that - It can be no defence to urge that the Customs Act, 1962 provides for the payment of interest only in respect of a refund of duty and interest and hence the Petitioner would not be entitled to interest on the balance of the sale proceeds which were directed to be paid by the Settlement Commission. The Petitioner has been deprived of a refund of its monies legitimately due to him in pursuance of an order of the Settlement Commission. There is absolutely no reason or justification for the unexplained delay. Hence, in exercise of the jurisdiction of this Court under Article 226 of the Constitution, an order awarding the payment of interest would be necessary. Interest allowed at the rate of 9%, revenue directed to pay the interest within a period of eight weeks.

Summary

Issues:
Implementing Settlement Commission's order for refund and interest payment.

Analysis:
The judgment by the High Court of Bombay addressed the issue of implementing the Settlement Commission's order for refund and interest payment under the Customs Act, 1962. The Settlement Commission had directed the customs duty settlement, payment of interest, and granted immunity from penalties and prosecution to the Petitioner. Additionally, the Commission ordered the release of seized goods and refund of the remaining amount after adjustments under Section 150 of the Act. Despite multiple representations and delays, the refund was not granted to the Petitioner, leading to the filing of proceedings under Article 226 of the Constitution in 2011.

During the proceedings, the Revenue informed the Court that a certain amount was paid to the Petitioner, leaving the issue of interest payment unresolved. The Revenue argued that since the amount paid did not represent duty or interest, Sections 27 and 27A of the Act were not applicable. However, the Court highlighted the provisions of Section 27 for refund applications and interest payments, emphasizing the need for timely refunds and interest payments on duty or interest refundable to applicants.

The Court noted that the Settlement Commission's order for refund should have been executed within a reasonable period, even though no specific timeline was mentioned. It emphasized that statutory powers must be exercised promptly, and delays without justification are unacceptable. The Court rejected the Revenue's argument that interest was not applicable on the balance of sale proceeds, emphasizing that delays in refunding legitimate dues undermine the rule of law. Consequently, the Court exercised its jurisdiction under Article 226 and ordered the payment of interest to the Petitioner.

In the final disposition, the Court directed the Respondents to pay interest at a rate of 9% per annum to the Petitioner within eight weeks from the judgment date. The interest was to be calculated from the date of the Commissioner's approval for refund sanctioning, as it represented a reasonable period after the Settlement Commission's order. The Court concluded the judgment with no order as to costs, resolving the issue of interest payment on the Settlement Commission's order for refund effectively.