2020 (5) TMI 370 - HC - Customs

Calculation of interest on delayed refund - relevant date - correction of calculation of interest from 27.01.2010 namely from the date on which the interest claimed is to be paid - Section 27(1)(a) of the Customs Act 1962 - HELD THAT - Tribunal after considering rival contentions raised has rightly held that claims were returned due to deficiency and deficiency memos having been addressed itself would evidence that there cannot be a claim for interest as no show cause notice was issued is erroneous conclusion as provisions of Section 11B of the Central Excise Act 1944 do not contemplate for returning of any refund claims - As rightly held by the Tribunal cause of action for claiming interest would arise after 3 months from the date of filing of said refund claim. If at all the application is defective it would only be an irregularity not illegality. The application for refund would not be contrary to Section 11B of the Central Excise Act 1944 and as such we are not inclined to admit this appeal since there is no substantial question of law involved in this appeal for being adjudicated - appeal dismissed.

Summary

Issues:
1. Interpretation of Customs Refund Application Regulations, 1995 regarding the liability to pay interest on incomplete applications.
2. Application of Section 27(1)(a) of the Customs Act, 1962 in relation to the payment of interest on refund claims.
3. Claim for refund of customs duty and interest on the differential duty paid.
4. Validity of the rejection of refund claims due to deficiencies and subsequent re-submissions.
5. Determination of the liability to pay interest on refund claims as per Section 11B of the Central Excise Act, 1944.

Analysis:
1. The appellant contested the order passed by CESTAT, which directed the payment of interest by the appellant from the date of the interest claimed. The appellant argued that as per Customs Refund Application Regulations, 1995, if an application for refund is incomplete, the liability to pay interest starts from the date of receipt of a complete application. The appellant relied on Section 27(1)(a) of the Customs Act, 1962, stating that failure to provide necessary evidence with the application would not entitle the applicant to claim interest from the date of the claim. The appellant raised substantial questions of law regarding the payment of interest, seeking a ruling in favor of the revenue.

2. The respondent, an exporter of iron ore fines, was required to pay a differential duty of customs due to the iron content exceeding 60%. After a series of events involving the submission and rejection of refund claims, the respondent sought a refund of the amount realized by the department through a bank guarantee. The adjudicating authority sanctioned the refund but rejected the claim for interest, deeming the application to have been received on the date of a complete application. The appellate authority affirmed this decision, leading to an appeal before CESTAT.

3. The Tribunal, in its decision, considered the provisions of Section 11B of the Central Excise Act, 1944, and rejected the argument that deficiency memos indicated a lack of entitlement to interest. Citing a relevant judgment, the Tribunal held that interest liability arises after three months from the date of receipt of the application. The Tribunal emphasized that if an application is defective, it constitutes an irregularity rather than illegality. The Tribunal also noted that a fresh refund application merged with the earlier one, and the liability for interest was determined accordingly. Ultimately, the Tribunal dismissed the appeal, stating that no substantial question of law existed for adjudication.

4. The judgment clarified the legal principles governing the payment of interest on refund claims under customs laws and excise regulations. It highlighted the importance of complying with application requirements and the timeline for claiming interest on refunds. The decision provided a detailed analysis of the procedural aspects involved in refund claims and the significance of addressing deficiencies in applications. By referencing relevant legal provisions and precedents, the judgment offered a comprehensive interpretation of the law to resolve the dispute between the appellant and the respondent effectively.