2009 (1) TMI 273 - AT - Customs

Refund claim interest on delayed refund - The importer thereafter filed a refund claim for Rs. 45704/- on October 1985 which was rejected later Thereafter the refund claim was processed by the custom house and the necessary documents were furnished by the importer vide his letter dated 26-12-06. A copy of the balance sheet was called to examine the unjust enrichment angle on 19-2-07 which was furnished on 12-3-07. The refund claim was thereafter sanctioned claim of interest on delayed refund rejected by the AC held that - Tribunal and the Commissioner (Appeals) have upheld the applicability of the exemption notification and only then the cause of refund has arisen. Even otherwise once the refund claim was pending in 1991 then as per 1st proviso to sub-section (1) of Section 27 the claims were governed by the unjust enrichment and therefore while submitting the refund claim the importer was duty bound to submit proof that incidence of duty has not been passed on which was not done by him on his own but the documents were furnished in December 2006 and March 2007. Interest not allowed.

Summary

Issues:
1. Grant of interest on refund claim filed by importer.
2. Applicability of unjust enrichment principle to refund claims prior to 1991.
3. Consideration of documents and grounds for refund claim.

Analysis:

1. Grant of Interest on Refund Claim:
The case involved two appeals, one by the importer and the other by the revenue, regarding the rejection of a refund claim for customs duty. The importer claimed interest from the date of filing the refund claim in 1985, while the revenue argued that interest should be calculated from a later date when necessary documents were furnished. The Commissioner (A) held that interest should be calculated from the date when the refund claim became ready for processing, i.e., after receiving documents in December 2006. The Tribunal agreed with the revenue, stating that no interest was due as the necessary documents proving non-passing on of duty incidence were not submitted with the initial refund claim.

2. Applicability of Unjust Enrichment Principle:
The revenue contended that the Commissioner (A) wrongly held that the principle of unjust enrichment does not apply to refund claims before 1991. They argued that the Customs Act explicitly states that the principle applies to past cases as well. The Tribunal upheld this argument, emphasizing that the importer failed to provide proof of non-passing on of duty incidence until 2006 and 2007. Therefore, the Tribunal concluded that the principle of unjust enrichment applied to the case, justifying the denial of interest on the refund claim.

3. Consideration of Documents and Grounds for Refund Claim:
The Tribunal noted that the initial refund claim lacked essential documents and grounds for claiming the refund. The importer failed to provide necessary evidence supporting the entitlement to the duty exemption until much later. The Tribunal highlighted that the cause for the refund only arose after the exemption benefit was upheld and the assessment was set aside. Additionally, the Tribunal emphasized that the importer was obligated to prove non-passing on of duty incidence, which was only done after significant delays in submitting documents. Consequently, the Tribunal rejected the importer's appeal and restored the Order-in-Original, agreeing with the revenue's position on the interest calculation and unjust enrichment principle.

In conclusion, the Tribunal's decision favored the revenue's arguments, denying interest on the refund claim due to delays in submitting essential documents and upholding the principle of unjust enrichment for cases before 1991. The judgment highlighted the importance of timely submission of necessary evidence and grounds for refund claims to avoid delays and disputes regarding interest calculations and unjust enrichment principles.