2016 (12) TMI 377 - AT - Customs

Refund claim with interest - amount encashed by the Revenue invoking the Bank Guarantee - time bar - Section 27(1) of C.A. 1962 - Held that - the encashment of the Bank Guarantee by the department on 17.12.1999 despite they are being an interim order of the Hon ble High Court not to encash the Bank Guarantee; is an illegal step of the department which amounts to holding back of an amount for which department had no legal sanction and can be termed as an amount retained by the department without authority to law. The office of the Jt. DGFT have subsequently accepted the contention of appellant and held that appellant had to only discharge the differential Customs duty along with interest and composition fees, which enables them to get the export obligation discharged certificate, which would mean that the consignment imported duty free are consumed by the appellant for export of the goods as agreed upon by them when they procured advance licence - averment of the appellant that they have completed the export completion is not contested by the Revenue. The appellant was well within his legal rights to claim the refund of the amount encashed by the Revenue invoking the Bank Guarantee. An application filed by the appellant on 13.10.2001 was correct application which remained unprocessed by the Revenue till 11.05.2005 and the refund was sanctioned on 13.05.2005. In our considered view, appellant is entitled to interest in accordance with law after three months from 13.10.2001 till 13.05.2005 as per Board Circular dated 02.01.2002 - appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Refund of encashed Bank Guarantee amount
2. Claim for interest on delayed refund

Analysis:
1. The appeal was against the Order-in-Appeal passed by the Commissioner of Customs (Appeals) concerning the encashment of a Bank Guarantee due to the failure of the appellants to submit proof of fulfilling Export Obligation within the stipulated time period. The appellants sought a refund of the encashed amount, which was initially rejected by the Lower Authority but later processed and sanctioned after an appeal. However, the claim for interest on the delayed refund was rejected by the Lower Authority, leading to an appeal by the appellants.

2. The appellant contended that interest should be payable on the delayed refund amount as per Section 27(1) of the Customs Act, 1962. The Chartered Accountant argued that the encashment of the Bank Guarantee was premature and without awaiting a decision from the Jt. DGFT, who later directed the payment of composition fees and differential Customs duty. The appellant relied on legal precedents and CBEC Circulars to support their claim for interest on delayed refund.

3. The Departmental Representative maintained that interest could only be considered on amounts claimed as a refund of duty, citing a Supreme Court judgment. However, the Tribunal found in favor of the appellant, noting that the encashment of the Bank Guarantee was illegal as there was an interim order not to do so. The Tribunal also highlighted that the Jt. DGFT accepted the appellant's contentions, confirming the completion of export obligations.

4. The Tribunal held that the appellant was entitled to interest on the delayed refund amount, citing legal provisions and precedents supporting their decision. The impugned order was deemed unsustainable and set aside, allowing the appeal with consequential relief. The Tribunal emphasized the appellant's legal right to claim the refund and awarded interest from a specified date until the refund was sanctioned, in accordance with relevant legal principles and court judgments.