2016 (7) TMI 979 - AT - Customs

Claim of interest on delayed refund - the interest on delayed refund is directed to be paid which is beyond three months from the date of application for refund. - plea for interest on interest is rejected. - Decided partly in favor of appellant.

Summary

Issues Involved:
- Claim of interest on Special Excise Duty (SED) of Rs. 1,27,090/-
- Claim of interest on delayed refund of interest sanctioned to the appellant

Analysis:

Claim of Interest on Delayed Refund:
The appellant contended that they were eligible for interest on SED collected forcefully without legal authority, leading to a struggle for six years. The consultant argued for interest from 05.02.2004 to 07.05.2010, but the appellate authority sanctioned interest only from 11.03.2008 to 25.08.2009, denying interest for a significant period. The Commissioner (Appeals) found the delay in refund sanctioning by the department from 11.03.2008 and directed payment of interest till the date of refund at the prescribed rate. The Commissioner's decision was based on the submission that the appellant had cooperated and submitted necessary documents by 11.03.2008, justifying interest beyond three months from the application date in 2004. The Commissioner directed the Customs to pay the dues accordingly.

Claim of "Interest on Interest":
Regarding the claim of "interest on interest," the Madras High Court judgment in the case of CC (Exports) Vs VBC Industries Ltd. was cited, distinguishing it from the Supreme Court's ruling in Sandvik Asia Ltd. Vs Commissioner. The High Court emphasized that Section 27A of the Customs Act should be read restrictively, limiting interest to duty alone and not extending to interest. The Tribunal's decision in VBC Industries Ltd. Vs CCE was distinguished by the Division Bench in Virchow Laboratories Ltd. Vs Cex. & Cus., stating that interest on delayed payment of interest was impermissible under the Customs Act. The Tribunal held that there was no provision for such interest, aligning with the Larger Bench's view that interest on delayed payment of interest was not permissible under the Act or rules, thus rejecting the plea for interest on interest.

In conclusion, the Tribunal directed the payment of interest on delayed refund beyond three months from the application date while rejecting the plea for interest on interest. The judgment was pronounced on 12.07.2016.