1998 (3) TMI 137 - SC - Customs

Whether a writ petition under Article 226 of the Constitution of India seeking the relief of payment of interest on delayed refund of the amount paid by the assessees towards the customs duty redemption fine and penalty under the Customs Act 1962 was maintainable? Held that - In the present case till the insertion of Section 27A in the Act by Act 22 of 1995 there was no right entitling payment of interest on delayed refund under the Act. Such a right was conferred for the first time by the said provision. Act 22 of 1995 also inserted Section 28AA which provides for payment of interest on delayed payment of duty by a person who is liable to pay the duty. Thus at relevant time there was no statutory right entitling the respondents to payment of interest on delayed refund and the writ petition filed by them was not for the enforcement of a legal right available to them under any statute. The claim for interest was in the nature of compensation for wrongful retention by the appellants of money that was collected from the respondents by way of customs duty redemption fine and penalty. In view of the law laid down by this Court in Suganmal (1964 (11) TMI 7 - SUPREME Court) a writ petition seeking the relief of payment of interest on delayed refund of the amount so collected could not in our opinion be maintained. The decisions on which reliance has been placed by Shri Rawal were cases where the legality of the orders requiring payment of tax or duty were challenged and the High Court in exercise of its jurisdiction under Article 226 of the Constitution while setting aside the said orders has directed the refund of the amount so collected with interest. The direction for payment of interest in these cases was by way of consequential relief along with the main relief of setting aside the order imposing the tax or duty. Those cases stand on a different footing and have no application to the present case. The appeal is therefore allowed the impugned judgment of the High Court is set aside.

Summary

Issues:
1. Whether a writ petition under Article 226 seeking payment of interest on delayed refund of customs duty, redemption fine, and penalty under the Customs Act, 1962 is maintainable.

Analysis:
In the judgment delivered by the Supreme Court of India, the common question in both appeals was whether a writ petition under Article 226 of the Constitution seeking interest on delayed refund of amounts paid by the assessees towards customs duty, redemption fine, and penalty under the Customs Act, 1962 was maintainable. The first case involved M/s. Orient Enterprises, where the Collector of Customs issued a show cause notice for undervaluation, leading to confiscation of goods and imposition of fines. The Tribunal later allowed the appeal, directing the refund of the amount paid. The High Court allowed the writ petition seeking interest on the refunded amount, which was contested by the appellants citing the absence of a provision for interest payment at the relevant time. The second case involved Elephanta Oil & Vanaspati Industries, where a similar scenario unfolded, and the High Court also directed payment of interest on the refunded amount. The Court held that until the introduction of Section 27A in the Act, there was no statutory right for interest on delayed refunds. The judgments cited by the respondents were distinguished as they involved challenges to the legality of tax or duty orders, unlike the present cases seeking interest as compensation for wrongful retention of money.

The Court emphasized the distinction between seeking a refund as a consequential order in cases challenging the legality of assessments and seeking a refund solely for the purpose of refund. It was held that a writ petition solely seeking a refund is not ordinarily maintainable, as parties have the right to challenge illegal assessment orders separately. The judgments relied upon by the respondents were deemed inapplicable as they involved challenges to tax or duty orders, unlike the present cases seeking interest as compensation for wrongful retention of money. The Court noted that the writ petitions were not for the enforcement of a legal right under any statute but rather for compensation, which could not be maintained under Article 226.

In conclusion, the Court allowed the appeals, setting aside the High Court judgments and dismissing the writ petitions seeking interest on refunded amounts. The absence of a statutory right for interest on delayed refunds until the introduction of Section 27A was a key factor in the Court's decision. The judgments cited by the respondents were distinguished as they involved challenges to the legality of tax or duty orders, unlike the present cases seeking interest as compensation for wrongful retention of money.