2010 (6) TMI 193 - HC - Customs

Interest- Delay in refund- Refund application filed on 11.09.2004 after favourable order. Refund granted on 12.11.2008 without interest. Revenue s submission that petitioner submitted Chartered Accountant s certificate only on 10.10.2006. Held that- refund application under section 11B(1) of Central Excise Act, 1944 or under section 27(1) of Custom Act need not be insisted upon. Revenue required to pass order even if papers showing inapplicability of unjust enrichment provision not submitted. No finding recorded within period of 3 months of filing of application that application cannot be termed as under section 27. Legitimate use of fund denied. Revenue s conduct cannot be overlooked as purpose of introducing section 27A and issuance of circular would be defeated.

Summary

Issues:
- Entitlement to interest under Section 27A of the Customs Act, 1962 for a refund claim.
- Application of the doctrine of unjust enrichment in the refund claim process.

Analysis:
1. Entitlement to Interest under Section 27A:
The petitioner sought interest on the refund amount under Section 27A of the Customs Act, 1962. The petitioner contended that the refund application was made on 11th September, 2004, and the disbursement without interest was made on 12th November, 2008. The petitioner relied on the similarity between Section 27 and Section 27A of the Customs Act, 1962, and Section 11B and Section 11BB of the Central Excise Act, 1944. Referring to the decision in Swaraj Mazda Ltd. Vs. Union of India, it was argued that unless a finding is made within three months from the receipt of the refund application that it is incomplete, the liability to pay interest cannot be denied. The court agreed with this argument and held that the petitioner was entitled to interest from 11th December, 2004, to 11th November, 2008.

2. Application of Doctrine of Unjust Enrichment:
The respondent argued that the refund application was complete only on 10th October, 2006, as per the certificate from a Chartered Accountant. However, the court referred to a department circular stating that refund applications need not be insisted upon if certain conditions are met. The court emphasized that if an applicant fails to show that the refund is not hit by the doctrine of unjust enrichment, the customs authority must still pass an order regarding the refund entitlement. In this case, the respondent failed to pass any order within three months from the receipt of the application, leading to the conclusion that the petitioner was not hit by the doctrine of unjust enrichment, and thus entitled to the refund amount with interest.

3. Judicial Precedents and Final Decision:
The court cited previous judgments to support its decision, emphasizing the importance of timely refund disbursement to discourage delays by authorities. Ultimately, the court ordered the respondents to pay interest at 6% per annum on the refund amount from 11th December, 2004, to 11th November, 2008. Failure to comply would result in increased interest at 10% per annum. The rule was made absolute in favor of the petitioner, with costs quantified at Rs.10,000.

This detailed analysis of the judgment highlights the key legal arguments, precedents, and the final decision rendered by the Bombay High Court regarding the entitlement to interest under Section 27A of the Customs Act, 1962 and the application of the doctrine of unjust enrichment in the refund claim process.