2017 (11) TMI 1340 - HC - Customs

Interest on refund - redemption fine and bank guarantee - order of the adjudicating authority having reversed, petitioners become entitled to the amount deposited, being there neither any challenge to the order of Tribunal nor was the amount stayed by the Higher Court - Whether the petitioners is entitled to interest on redemption fine and Bank guarantee? - Held that - As per the settled law, it may be open for the Department to challenge the said judgment before the higher Court, but cannot avoid implementation of the Tribunal s order for an indefinite period without stay being granted by the Higher Court - In the present case, as on date, admittedly, no stay has been granted, within a reasonable time after the judgment of the Tribunal, therefore, the Department was expected in law to implement the directions, which would result into refund of sum of ₹ 10 lakhs deposited by the petitioners and releasing of Bank Guarantees. Though the petitioners reminded the Department on numerous occasions, this was not done for over three years - Merely because the Customs Act, 1962 does not make any provision for granting interest under such eventuality, would not mean that the Court, in exercise of writ jurisdiction, cannot direct the Department to pay the same. When the facts are gross, to ensure refund of the amount years later without interest would be doing injustice. The Department must pay interest on the sum of ₹ 10 lakhs deposited by the petitioners to the extent of delay in refunding the same - On the Bank Guarantees, we do not see any case for granting interest since the petitioners were not made to deposit the same with the Department. The Respondent is directed to pay interest at the rate of 8% per annum upon completion of period of three months from the date of judgment of the Tribunal till actual payment of refund - no interest on the Bank Guarantee component - petition allowed in part.

Summary

Issues:
Prayer for release of sum and bank guarantees, withholding of amount by the Department, entitlement to refund, interest on the withheld amount, legal provisions for interest, relevance of previous judgments, direction for payment of interest.

Analysis:
The petitioners sought the release of a sum of ?10 lakhs and bank guarantees totaling ?20 lakhs deposited with the Department. The dispute arose when the Department confiscated goods intended for export due to a disagreement over the goods' description. The adjudicating authority imposed a redemption fine and penalties, which were later overturned by the Tribunal. Despite this, the Department delayed refunding the sum and releasing the bank guarantees, prompting the petitioners to file a petition seeking relief. The Department argued against paying interest, citing the absence of provisions in the Customs Act, 1962 and pending appeals. The Court acknowledged the undisputed facts and ruled that the Department was obligated to implement the Tribunal's order within a reasonable time, especially in the absence of a stay from a higher court. The Court held that the Department must pay interest on the withheld sum of ?10 lakhs but not on the bank guarantees, as they were not deposited with the Department. The Court emphasized that the lack of specific provisions in the Customs Act did not preclude it from directing the Department to pay interest, especially to prevent injustice from delayed refunds. The Court distinguished a previous Supreme Court judgment involving a different statutory provision for refunds with interest. Consequently, the Court directed the Department to pay interest at 8% per annum on the withheld sum from three months after the Tribunal's judgment until the actual payment, with a deadline of 31.12.2017 for compliance.