2007 (4) TMI 157 - AT - Customs

Interest on refund Appellant had made deposit of Bank guarantee with the department and the amount deposited not refunded by department within the prescribed time, hence liable to pay interest on delay- Interest payment sustained by the tribunal

Summary

Issues:
Appeal for interest on delayed refund due to encashment of Bank Guarantee by Revenue.

Analysis:
1. The appellant contended that their Bank Guarantee of Rs. 7,43,014/- was encashed by the Revenue on 22-12-1995 to realize the differential duty as stated in the Revenue's Misc. Application No. 128/97. The appellant argued for interest on delayed refund since the amount was legitimately refundable, and the refund was not made within the prescribed period. The appellant highlighted that the Bank Guarantee was encashed when no duty was payable, emphasizing their entitlement to interest as per law.

2. The respondent's advocate relied on various decisions to support their contention that security deposit, when refunded, does not bear interest if there is a delay. The respondent's argument was based on legal precedents such as Sheela Foam Pvt. Ltd. v. Commissioner of Central Excise and other relevant cases.

3. The Revenue's representative argued that the appellant was required to make a security deposit against imports, which, when refunded, would not accrue interest in case of a delay.

4. After hearing both sides and examining the case records, the Tribunal noted that the Department's own pleading in Misc. Application No. 128/97 confirmed the encashment of the Bank Guarantee to realize the differential duty. The Tribunal emphasized that since the encashment was to recover duty, the appellant's claim for interest on delayed refund was valid. The Tribunal cited legal principles and previous judgments to support the appellant's right to restitution with interest, emphasizing equitable considerations and the appellant's deprivation of liquidity since 1996.

5. Consequently, the Tribunal allowed the appeal, emphasizing the appellant's entitlement to interest on the delayed refund. The decision was pronounced in open court on 20-4-2007.