1990 (3) TMI 81 - HC - Customs

Summary

Issues Involved:
1. Refund of countervailing/additional duty of Customs.
2. Interest on the refund.
3. Legality of the levy of additional duty.
4. Limitation period for refund claims.
5. Jurisdiction of the writ court under Article 226.
6. Entitlement to interest on the refund amount.

Detailed Analysis:

1. Refund of Countervailing/Additional Duty of Customs:
The petitioners, a manufacturing company, imported certain raw materials and paid additional duty under Section 3 of the Customs Tariff Act. Later, they discovered through a circular dated 1st October 1984 by the Central Board of Excise and Customs that no such duty was payable on the imported goods. They applied for a refund, which was initially rejected for 131 Bills of Entry by the Assistant Collector of Customs on the grounds of limitation but allowed for 3 Bills of Entry.

2. Interest on the Refund:
The petitioners also sought interest on the refunded amount. The judgment concluded that since the duty was collected unlawfully, the respondents must compensate for the use of the money by paying interest at the rate of 10% from the date the refund applications were rejected until the date of payment.

3. Legality of the Levy of Additional Duty:
The court found that the imposition of countervailing duty on the imported goods was unauthorized and illegal. The Central Board of Excise and Customs' circular clarified that alcohols of all kinds, whether potable or otherwise, are excluded from Tariff Item 68. Thus, the levy was based on a misinterpretation of the law.

4. Limitation Period for Refund Claims:
The court held that the limitation period under Section 27 of the Customs Act does not apply when the levy is without jurisdiction and illegal. The petitioners became aware of the illegality only in January 1985, and they promptly filed for a refund. Hence, their claims were within the limitation period prescribed by the general law, i.e., three years from the date of knowledge of the illegality.

5. Jurisdiction of the Writ Court under Article 226:
The court asserted its jurisdiction to grant relief under Article 226 of the Constitution, notwithstanding the procedure prescribed by the Customs Act. It emphasized that when a levy is in violation of Article 265 of the Constitution, the authorities cannot retain the money illegally realized. Therefore, the writ petition was maintainable, and the petitioner was entitled to seek a refund through this extraordinary remedy.

6. Entitlement to Interest on the Refund Amount:
The court ruled that the respondents must pay interest on the refunded amount as they had unlawfully retained the money. Interest was deemed as compensation for the use and detention of money, and thus, the respondents were directed to pay interest at 10% from the date of rejection of the refund applications until the date of payment.

Conclusion:
The High Court directed the respondents to re-process the refund applications for the 131 Bills of Entry within a week and grant the refund within two weeks thereafter, along with interest. The court also provided a conditional stay on the judgment, requiring the respondents to deposit the refund amount with interest in a fixed deposit account by 15th April 1990.