2019 (5) TMI 881 - HC - Customs

Interest on the refund u/s 27A - Section 130A of the Customs Act 1962 - doctrine of Merger - HELD THAT - The Explanation to Section 27A makes it clear that the orders passed by the Commissioner (Appeals) and the Appellate Tribunal are also deemed to be orders passed u/s 27 (2). In other words what is recognized by the Explanation to Section 27 A is nothing but the common law doctrine of merger . Even if the Assistant Commissioner of Customs rejects an application for refund u/s 27 (2) the moment the said order is set aside on first appeal or second appeal the order merges. The last portion of the substantial part of the Section 27A makes it clear that the starting point for calculation of interest is the expiry of three months from the date of receipt of the application. The date of commencement of the liability for payment of interest is not relatable to either the date of the original order or the date of the order of the appellate authority but relatable only to the date of expiry of three months from the date of the application - Therefore it leaves no iota of doubt that the assessee in this case became entitled to interest from the date of expiry of 3 months of the date of application. The date of expiry of the period of three months from the submission of the application cannot be the date of expiry of three months from the date of the reminder. It is the original application that triggers the period from which the liability to pay interest on the refund arises for the Department. Therefore the writ petitions are bound to be allowed. The question of law raised by the Revenue is answered against them and the four appeals are dismissed.

Summary

Issues:
Challenging denial of interest, appeals under Customs Act, refund claim rejection, CESTAT orders, writ petitions, interest calculation, statutory appeals, Supreme Court appeals, interest payment, Section 27A interpretation.

Analysis:
The judgment involves multiple issues, starting with the petitioner challenging the denial of interest and the Revenue appealing under Section 130A of the Customs Act against CESTAT orders directing interest payment on refunds. The petitioner, an importer of Timber Logs, claimed refunds for Special Additional Duty paid, leading to a series of rejection orders by the Adjudicating Authority. CESTAT later allowed the appeals, prompting the Adjudicating Authority to direct the petitioner to furnish a bank guarantee. This decision was challenged through writ petitions, which were subsequently allowed by the High Court, directing refunds to be made.

The Revenue's subsequent appeals against the CESTAT orders were dismissed by the High Court, and their appeals to the Supreme Court were also unsuccessful. The issue of interest payment arose when the Adjudicating Authority granted interest only for a portion of the period, leading to the petitioner filing writ petitions seeking the balance of interest. The CESTAT directed the Department to pay interest from the expiry of 90 days from the date of the refund application, a decision upheld by the High Court.

The substantial question of law raised by the Revenue revolved around the interpretation of Section 27A of the Customs Act, specifically regarding the commencement of interest payment. The court clarified that orders by higher authorities, like the Commissioner (Appeals) and the Appellate Tribunal, are deemed to be orders under Section 27(2) of the Act, invoking the doctrine of merger. The liability for interest payment commences from the expiry of three months from the date of the refund application, not the date of the original or appellate orders. Consequently, the court dismissed the Revenue's appeals.

Regarding the writ petitions, the court found the Adjudicating Authority's decision to calculate interest from the reminder date post-writ petition disposal contrary to Section 27A. The court emphasized that interest liability starts from the original application date, not the reminder date. As a result, the writ petitions were allowed, instructing the Department to calculate and disburse the interest within eight weeks from the court order.

In conclusion, the judgment addressed various legal issues concerning interest payment on refunds under the Customs Act, clarifying the interpretation of Section 27A and emphasizing the importance of adhering to statutory timelines for interest calculation and disbursement.