2015 (9) TMI 34 - HC - Customs

Refund of Duty Payment of Interest delay in refund - Aggrieved by order of tribunal, granting refund of custom duty along with interest, revenue preferred present appeal Whether Revenue was liable to pay interest on refund of duty Held that - Section 27-A makes it clear that interest would be payable if amount is not refunded within three months from date of application Explanation of provision only means that liability to pay amount would arise after order of refund of amount is finalized, either in appeal or by Commissioner, Tribunal or Court, but such liability would be from three months after date of application Same cannot be interpreted that liability to pay interest would be from date of order of Tribunal or Court, which may be passed in appeal Supreme court in case of Ranbaxy Laboratories Ltd. 2011 (10) TMI 16 - Supreme Court of India held that interest has to be paid from three months after date of application filed by respondent Thus, liability to pay interest would be from three months after date of application till date of its actual payment Also respondent would be entitled to costs or compensation for high handedness of appellant, by initially not refunding amount for over 12 years, and then refusing to pay interest even after order of Tribunal Decided against Revenue.

Summary

Issues Involved:
1. Liability of the Department to pay interest on delayed refund under Section 27A of the Customs Act, 1962.
2. Interpretation of the Explanation under Section 27A concerning the calculation of delay.
3. Whether the Tribunal's decision on interest payment from the date of the original claim is correct.
4. Impact of the refund amount lying in the Consumer Welfare Fund on interest liability.
5. Impact of the stay order by the High Court on the interest liability.

Issue-wise Detailed Analysis:

1. Liability of the Department to Pay Interest on Delayed Refund:
The court examined whether the Department is liable to pay interest on the refund amount for the delay caused during the legal process. The respondent-company had applied for a refund on 24.12.1998, but the refund was sanctioned only on 13.04.2011, without interest. The Tribunal had directed the payment of interest from three months after the date of the application till the date of payment, relying on the Supreme Court's judgment in Ranbaxy Laboratories Ltd. v. Union of India.

2. Interpretation of the Explanation under Section 27A:
The court clarified that the Explanation under Section 27A means that the liability to pay interest arises after the order of refund is finalized, either by the Commissioner, Tribunal, or Court, but such liability would be from three months after the date of the application. The court rejected the appellant's contention that the liability to pay interest would be from the date of the order of the Tribunal or the Court.

3. Tribunal's Decision on Interest Payment from the Date of the Original Claim:
The court upheld the Tribunal's decision that interest is payable from three months after the date of the original application for a refund (24.12.1998) until the actual payment date. The court emphasized that the liability to pay interest starts from three months after the date of the application, as per Section 27A of the Act.

4. Impact of Refund Amount Lying in the Consumer Welfare Fund:
The court dismissed the appellant's argument that the Department is not liable to pay interest because the refund amount was lying with the Consumer Welfare Fund for a substantial period. The court held that this does not affect the liability to pay interest from three months after the date of the application for a refund.

5. Impact of Stay Order by the High Court on Interest Liability:
The court noted that during the pendency of the appeal before the High Court, there was a stay order granted. However, this did not absolve the Department from the liability to pay interest. The court emphasized that the interest has to be paid from three months after the date of the application for a refund, irrespective of the stay order.

Conclusion:
The court dismissed the appeal, holding that the Department is liable to pay interest from 24.03.1999 (three months after the date of the application for a refund) till the actual date of payment, as per the rates notified by the Central Government. Additionally, the court directed the Department to pay an additional interest of 9% per annum on the amount liable for payment as on 13.04.2011, till its actual payment, due to the high-handedness of the Department in delaying the payment of interest and dragging the respondent into prolonged litigation. All pending applications were consigned to file.