2009 (6) TMI 316 - AT - Customs

Delay in refund - (a) What should be the rate of interest the respondent is entitled to under Section 27A of the Customs Act? - (b) Is the respondent entitled to claim interest on the amount of interest payable under Section 27A ibid? - according to the learned counsel, interest is liable to be paid to a refund-claimant at the rate prescribed by the Central Government as on the date immediately succeeding the period of three months from the date of refund application. It is argued that this time is fixed under Section 27A and, therefore, interest has to be paid at the same rate for the entire period of delay. - This argument would render the remaining successive notifications redundant and, therefore, the argument cannot be accepted. The expression time being denotes each and every point of time of delay If the delay starts on 12-5-2000, the rate of interest payable will be 15%. If this delay continues beyond 10-5-2001, interest becomes payable at the rate of 9% for the period from 11-5-2001. Likewise, where the delay continues beyond 12-5-2001, interest becomes payable at the rate of 8% from 13-5-2002. - The second question relates to the assessee s claim for interest on interest - respondent submits that interest on interest requires to be paid by the Revenue at the same rate at which the simple interest is payable under Section 27A of the Customs Act, on the principle laid down by the Apex Court in Sandvik Asia Ltd. v. CIT, Pune - - I find that the lower appellate authority had no occasion to consider this kind of an argument. Commissioner (A) further remanded matter exceeding his jurisdiction - I allow this appeal by way of remand after setting aside his order

Summary

Issues:
1. Rate of interest under Section 27A of the Customs Act.
2. Entitlement to claim interest on the amount of interest payable under Section 27A.

Analysis:

Issue 1: Rate of Interest under Section 27A of the Customs Act
The appeal raised two questions regarding the rate of interest payable to the respondent under Section 27A of the Customs Act and whether interest on interest can be claimed. The original authority initially granted interest at varying rates based on specific notifications issued by the Central Government under Section 27A. The adjudicating authority sanctioned a refund of duty along with interest, which was later revised due to subsequent notifications prescribing different interest rates for delayed refunds. The original authority calculated interest at 15% for the initial delay period and reduced rates for the subsequent period, whereas the Commissioner (Appeals) opted for a uniform 15% rate for the entire delay period. The argument presented by the respondent's counsel regarding the interpretation of "for the time being fixed by the Central Government" was rejected, emphasizing that the rates prescribed by successive notifications should be applied as per the duration of the delay. The appellate authority's decision was deemed incorrect, and the original authority's approach was upheld.

Issue 2: Entitlement to Claim Interest on Interest
The second question pertained to the claim for interest on interest by the respondent. The J.C.D.R. contended that there is no provision in the Customs Act for granting interest on interest. Conversely, the respondent's counsel argued that interest on interest should be paid at the same rate as simple interest under Section 27A, citing a precedent set by the Apex Court. The lower appellate authority did not address this argument, leading to a serious flaw in the impugned order. Additionally, it was noted that the Commissioner (Appeals) exceeded jurisdiction by remanding the matter, which is not within their power as per a ruling by the Apex Court. Consequently, the order of the Commissioner (Appeals) was deemed unsustainable, and the appeal was allowed for remand to reconsider the issue of interest on interest while providing both parties with the opportunity to present their cases effectively.

This detailed analysis of the judgment from the Appellate Tribunal CESTAT, Mumbai, highlights the intricate legal considerations surrounding the rate of interest under Section 27A of the Customs Act and the entitlement to claim interest on interest, emphasizing the importance of adhering to legal provisions and precedents in such matters.