2017 (6) TMI 745 - AT - Customs

Entitlement of interest - refund was denied on the ground that provisional assessment was still pending - Held that - the claim for interest is the question of equity which cannot be decided by this Tribunal - This Tribunal, as already noted herein, cannot decide the issue of equity and therefore granting of interest based on equity at this stage is beyond the powers of this Tribunal - impugned order is correct and legal - appeal rejected - decided against appellant.

Summary

Issues:
Appeal against rejection of interest claim on encashed bank guarantees.

Analysis:
The appellant filed appeals against the rejection of interest claim on bank guarantees encashed by revenue authorities in 1998. The first appellate authority had rejected the interest claim, leading to the current appeals. The appellant had imported goods and sought provisional assessment, complying with the requirement of executing a bond and submitting a bank guarantee of ?20.00 lakhs. Subsequently, finalization of bills of entry in 2005 resulted in a demand for differential duty, contested by the appellant. The Tribunal ruled in favor of the appellant. However, during the interim period, revenue authorities encashed the bank guarantees in 1998. The appellant sought a refund of the encashed amount in 2008, which was rejected as premature due to pending provisional assessments. After obtaining a favorable order, the appellant applied for a refund with interest in 2015, which was granted without interest, leading to the current appeals.

The main contention was the appellant's claim for interest on the encashed amount of ?20.00 lakhs, with the appellant arguing that once the revenue authorities were not entitled to retain the amount, they should refund it along with interest. The appellant cited a Supreme Court decision in M/s. Sandvik Asia Ltd. v/s Commr. of Income Tax-I Pune to support the claim for interest on equitable grounds. The Departmental Representative (DR) reiterated the findings of the impugned order, stating that a refund did not arise in this case.

The Tribunal, after considering the submissions and records, noted that the issue primarily revolved around the interest claim on the encashed bank guarantees. It observed that the rejection of the refund claim in 2008, without an appeal, precluded the appellant from claiming interest under the Customs Act, 1962. The Tribunal held that the question of interest was a matter of equity beyond its jurisdiction to decide.

The Tribunal distinguished the cases cited by the appellant's counsel, emphasizing that those cases involved different circumstances where interest claims were allowed based on specific provisions or inherent powers. It noted that the judgments cited were based on provisions in the Income Tax Act or involved High Court decisions invoking constitutional powers, which were not applicable in the current case. Consequently, the Tribunal upheld the impugned order, rejecting the appeals based on the lack of jurisdiction to grant interest on equitable grounds.

In conclusion, the Tribunal held that the impugned order was legally sound and free from infirmity, as the issue of granting interest based on equity fell outside its purview. The appeals were consequently rejected.