2013 (7) TMI 799 - HC - Customs

Interest on delayed refund whether the assessee shall be entitled to interest on delayed refund - Revenue contended that there was no question of payment of any interest in case of refund of fine or penalty because the same is not provided for in the statute The Customs Act being a fiscal statute, equity has no manner of application court rejected all the contentions of the assessee - Held that -the assessee would be entitled to the interest on refund being delayed by the department - It is true that there is no equity in the matter of taxation but that principle is applicable against the Revenue and not against the assessee - on equitable consideration tax cannot be realized - it was a mistake on the part of the Commissioner of Customs that he passed an incorrect or illegal adjudicatory order. Pursuant to the mistake committed by him, the writ petitioner was obliged to pay the amount assessed by him on account of redemption fine and penalty - once the doctrine of restitution is attracted, the interest is often as normal relief given in restitution decided against revenue.

Summary

Issues:
- Refund of penalty and fine with interest
- Applicability of Section 27A of the Customs Act
- Rate of interest for delayed refunds
- Legal principles regarding payment of interest in tax matters

Refund of penalty and fine with interest:
The High Court judgment addressed an appeal against a lower court's decision directing the refund of penalty and fine to the petitioner within a specified timeframe. The court ordered the authorities to refund the amount and assess the value of oil promptly, granting interest at 9% per annum from the date of the Appellate Order. The Revenue challenged this decision, arguing against the payment of interest on refunds of penalty or fine, citing the absence of such provision in the Customs Act.

Applicability of Section 27A of the Customs Act:
The appellant contended that Section 27A of the Customs Act, which governs interest on delayed refunds, did not apply to cases involving penalties and fines. The notification dated 12th September, 2003, specified a 6% interest rate, contrasting the 9% rate ordered by the Trial Court. The appellant relied on legal precedents to support the argument that interest rates for delayed refunds are subject to statutory provisions and cannot exceed the rates set by the Central Government.

Rate of interest for delayed refunds:
The dispute centered on the appropriate rate of interest for delayed refunds, with the appellant advocating for adherence to the 6% rate specified in the notification. The respondent, however, argued that the Trial Court's decision to award interest at 9% was justified given the circumstances of the case. The court analyzed the legal principles governing interest payments in tax matters and considered the specific facts of the case to determine the suitable rate of interest.

Legal principles regarding payment of interest in tax matters:
The judgment delved into legal principles regarding the payment of interest in tax-related cases, emphasizing the distinction between statutory rights and equitable considerations. The court referenced previous judgments to illustrate that interest on delayed refunds is not an automatic entitlement but can be granted based on specific circumstances. The application of the doctrine of actus curiae neminem gravabit was highlighted to support the decision to award interest in this case, emphasizing the need for restitution in situations where erroneous orders result in financial obligations for the affected party. Ultimately, the court upheld the Trial Court's decision, dismissing the appeal and affirming the payment of interest at the rate of 9% per annum.