2008 (1) TMI 81 - AT - Customs

Refund of the amount of interest paid by the respondent on the warehousing charges as per Circular No. 475/30/90 warehousing interest levied under Section 61(2) of the Customs Act is distinguishable from Customs duty - Accordingly, provisions of Section 27 will not apply to refund of interest recovered u/s 61(2) - However, the period under the Limitation Act may be applicable Refund allowed in view of impugned circular

Summary

Issues:
Refund of interest on warehousing charges.

Analysis:
The case involved the issue of refund of interest paid by the respondent on warehousing charges under Section 61 of the Customs Act, 1962. The Commissioner (Appeals) concluded that the interest amount paid on warehouse charges is liable to be refunded. The Commissioner relied on the case of M/s. J.K. Synthetics Ltd. v. Commissioner of Customs, Jaipur, where it was held that the provisions of Section 27 do not apply to refund of interest recovered under Section 61(2) of the Customs Act, 1962. The CBEC Circular dated 8-8-1990 also clarified the distinction between warehousing interest and Customs duty, stating that Section 27 does not apply to refund of interest under Section 61(2). The Commissioner found merit in the argument that the burden of interest paid on warehousing could not have been passed on to the customer as it is paid at the time of goods clearance.

The Revenue contended that the principle of unjust enrichment applies to these refunds. However, the Circular issued by CBEC reiterated the distinction between warehousing interest and Customs duty, stating that Section 27 does not apply to refund of interest under Section 61(2). The Tribunal in the case of J.K. Synthetics Ltd. v. CC, Jaipur upheld this Circular and directed the authorities to refund the interest amount. The Tribunal found that the issue was no longer res integra, and the Commissioner's order was free from any infirmity. Consequently, the appeal filed by the Revenue was rejected. The Tribunal decided to dismiss the application for staying the operation of the impugned order and proceeded to dispose of the appeal itself.

In conclusion, the Tribunal's decision was based on the interpretation of the relevant provisions of the Customs Act, supported by judicial precedents and CBEC Circulars. The issue of refund of interest on warehousing charges was settled in favor of the respondent, emphasizing the distinction between warehousing interest and Customs duty for the purpose of refund under Section 27 of the Act.