1987 (6) TMI 49 - HC - Customs

Summary

Issues Involved:
1. Maintainability of the writ application for refund under Article 226.
2. Entitlement of the petitioner to a refund during the pendency of an appeal.
3. Authority of the Customs Department to withhold refunds during the appeal process.
4. Entitlement to interest on the delayed refund.

Detailed Analysis:

1. Maintainability of the Writ Application for Refund under Article 226:
The petitioner filed a writ application under Article 226 of the Constitution challenging the non-implementation of an order dated May 15, 1985, by the Collector of Customs (Appeals) and the consequent withholding of a refund amounting to Rs. 6,04,733.47 P. The respondents argued that a writ application solely for the relief of refund is not maintainable. However, the court held that the writ application is maintainable if any amount is collected illegally and without authority of law. The court emphasized that the Appellate Collector had determined that no duty could be levied on the subject goods, making the collection unauthorized. Therefore, the petitioner was entitled to the refund, and the application under Article 226 was deemed maintainable.

2. Entitlement of the Petitioner to a Refund During the Pendency of an Appeal:
The respondents contended that the petitioner could not claim a refund while an appeal was pending before the Tribunal. They argued that the order of the Appellate Collector was not final and that the Tribunal was the proper authority to consider the refund. The court, however, rejected this argument, stating that mere filing of an appeal does not operate as a stay. The petitioner was entitled to the refund as the order dated May 15, 1985, had not been stayed by the Tribunal. The court noted that there is no provision in the Customs Act authorizing the Customs authority to withhold refunds during the pendency of an appeal.

3. Authority of the Customs Department to Withhold Refunds During the Appeal Process:
The court examined whether the Customs Department had the authority to withhold refunds during the appeal process. It found no specific provision in the Customs Act allowing the Customs authorities to withhold refunds during the pendency of an appeal. The court referred to Section 241 of the Income Tax Act, which allows withholding refunds if it adversely affects revenue, and noted the absence of a similar provision in the Customs Act. The court concluded that the Customs authorities could not withhold the refund due to the petitioner on the ground that a proceeding was pending before the Tribunal.

4. Entitlement to Interest on the Delayed Refund:
The petitioner also sought interest on the delayed refund. The court acknowledged that there is no specific provision under the Customs Act for payment of interest on delayed refunds. However, it held that where the refund is due and has been illegally withheld, the petitioner is entitled to interest as compensation for being deprived of the money. The court cited its previous judgment in the case of Calcutta Paper Mills Manufacturing Co., where it held that interest must be paid on unauthorized collections. Consequently, the court awarded interest at 12% per annum from the date of the order of the Appellate Collector until the date of payment.

Conclusion:
The court allowed the application, directing the respondents to grant the refund based on the order of the Collector of Customs (Appeals) dated May 15, 1985, with interest at 12% per annum from the date of the order until the date of payment. The refund was to be processed within six weeks from the date of communication of the judgment. The petitioner was required to furnish a bond undertaking to refund the entire sum, including interest, if the appeal was allowed by the Tribunal.