2024 (10) TMI 734 - HC - Customs

Interest on the delayed refund of Special Additional Duty (SAD) in terms of Sections 27 and 27A of the Customs Act, 1962 - relevant date for calculation of interest - whether interest is to be calculated only from 08 November 2022, i.e. three months from the date of the application dated 08 August 2022? HELD THAT - There is no allegation about the initial application for refund being incomplete or containing any other deficiencies. Admittedly, no deficiencies were pointed out to the petitioner either within 10 days or even later. The application dated 08 August 2022 only requested the respondent to implement the order dated 30 June 2022 made by the Commissioner (Appeals). This application/letter was mere in the nature of a follow-up letter or reminder. This application can not be styled or construed as an application for refund under Section 27A of the Customs Act or the Regulations. Based upon such misconceived construction or by referring to the explanation to Section 27A of the Customs Act, the respondent can not avoid payment of interest at the rate of 6% per annum from 04 August 2014, having retained and utilised the amount which was ultimately found to be refundable to the petitioner. The respondent has delayed granting the refund that was due and payable to the petitioner for almost ten years. Now, the respondent is avoiding the payment of interest on the delayed refund amounts by raising frivolous pleas even though the interest component comes to hardly Rs. 4,21,940/ as of the date of institution of the petition. In the context of Sections 11B and 11BB of the Central Excise Act, the Hon ble Supreme Court, in the case of Union of India Vs. Hamdard (Waqf) Laboratories 2016 (3) TMI 68 - SUPREME COURT has considered and rejected similar arguments made on behalf of the Revenue. Hon ble Supreme Court held the liability for the interest payment is statutory, and it is the bounden duty of the Assistant Commissioner to pay interest. Further, the court held that the liability of the Revenue to pay the interest under Section 11BB, which corresponds to Section 27A of the Customs Act, commences from the date of expiry of 3 months from the date of receipt of the application for refund or on the expiry of the said period from the date of which the order of refund is made. The Delhi High Court's decision in S.R. Polyvinyl Ltd. vs. Commissioner of Customs 2019 (11) TMI 543 - DELHI HIGH COURT , which interprets the provisions of the Customs Act, also supports the petitioner's case. On an identical issue, the Karnataka High Court has held that the period for calculating interest would start from the date of application even if a refund arose on account of appeal orders. Thus, on facts and in law, this Petition deserves to succeed. The revenue's entire approach has been far from fair. The petitioner was forced to litigate for the refund's recovery, and after the refund was sanctioned belatedly, the revenue, quite unreasonably, resisted interest payment on the delayed refunds. It is not as if the stakes were high for the revenue. The interest claim of the Petitioner comes to Rs 4,21,940/-. The respondent is directed to pay the petitioner the interest amounting to Rs. 4,21,940/- on the delayed refund of SAD. The respondent must pay the petitioner this amount within two months of today - petition allowed.

Summary

Issues Involved:

1. Entitlement to interest on delayed refund of Special Additional Duty (SAD) under Sections 27 and 27A of the Customs Act, 1962.
2. Calculation of interest period for the delayed refund.
3. Applicability of Section 27A explanation regarding the starting point for interest calculation.
4. Completeness and acknowledgment of the refund application as per Customs Refund Application (Form) Regulations, 1995.
5. Legal precedents and statutory interpretation concerning delayed refunds and interest.

Detailed Analysis:

1. Entitlement to Interest on Delayed Refund:

The petitioner sought a writ of mandamus directing the respondent to pay interest at 6% per annum on the delayed refund of SAD, as per Sections 27 and 27A of the Customs Act, 1962. The court noted that the petitioner had faced undue delays in the processing of the refund, which was initially applied for on 04 August 2014, and was only sanctioned on 01 April 2024. Despite the refund being granted, no interest was awarded, prompting the petitioner to claim Rs. 4,21,940/- as interest on the delayed refund.

2. Calculation of Interest Period:

The respondent argued that interest should be calculated from 08 November 2022, following a subsequent application on 08 August 2022, after the Commissioner (Appeals) order dated 30 June 2022. The court rejected this argument, emphasizing that the interest should be calculated from 04 September 2014, three months after the initial application date of 04 August 2014, as the refund was wrongfully delayed by the respondent.

3. Applicability of Section 27A Explanation:

The respondent contended that the explanation to Section 27A applied, suggesting that the interest period should begin from the date of the subsequent application. The court found this contention untenable, clarifying that the explanation to Section 27A did not apply since the refund order was not made by the Commissioner (Appeals) but was ultimately decided by the respondent. The court emphasized that the starting point for interest calculation is the date of the original application, not the date of any subsequent application or order.

4. Completeness and Acknowledgment of the Refund Application:

The court examined whether the initial application for refund was complete and acknowledged as per the Customs Refund Application (Form) Regulations, 1995. It was noted that the respondent did not claim any deficiencies in the original application, nor were any pointed out within the prescribed timeframe. The court concluded that the application was complete and any subsequent communication was merely a follow-up, not a new application, thus reinforcing the entitlement to interest from the original application date.

5. Legal Precedents and Statutory Interpretation:

The court referenced several legal precedents, including the Supreme Court's decision in Union of India Vs. Hamdard (Waqf) Laboratories, which held that the liability for interest is statutory and commences from the expiry of three months from the refund application date. Other high court decisions, such as those from Delhi and Karnataka, supported the petitioner's case, affirming that interest on refunds should be calculated from the date of the initial application. The court dismissed the respondent's reliance on tribunal decisions, noting that the factual situations in those cases were not comparable.

Conclusion:

The court allowed the petition, directing the respondent to pay Rs. 4,21,940/- as interest on the delayed refund within two months. If not paid within this period, the respondent was ordered to pay interest at 8% per annum, with potential consequences under the Contempt of Court Act for non-compliance. Additionally, the court ordered the respondent to pay Rs. 15,000/- in costs to the petitioner. The rule was made absolute with costs, underscoring the statutory entitlement to interest on delayed refunds and the importance of adhering to statutory timelines.