INTEREST FOR DELAY IN REFUND CLAIM CAN BE CLAIMED ONLY IF THE REFUND APPLICATION IS COMPLETE IN ALL RESPECTS

[DR.MARIAPPAN GOVINDARAJAN]

Claim for refund of customs duty

Section 27 of the Customs Act, 1962 (‘Act’ for short) provides the procedure for the claim for refund of duty.  The said section provides that any person claiming refund of any duty or interest,-

• paid by him; or
• borne by him,

may make an application in such form and manner as may be prescribed for such refund  to the Assistant Commissioner of Customs or Deputy Commissioner of Customs, before the expiry of one year, from the date of payment of such duty or interest.   The application shall be accompanied by such documentary or other evidence (including the documents referred to in section 28C -  documents relating to assessment, sales invoice, and other like documents, the amount of such duty which will form part of the price at which such goods are to be sold) as the applicant may furnish to establish that the amount of duty or interest, in relation to which such refund is claimed was collected from, or paid by, him and the incidence of such duty or interest, has not been passed on by him to any other person.

Interest on delayed refunds

Section 27A of the Act provides the payment of interest in case of delayed refunds by the Department.  This section provides that if any duty ordered to be refunded under section 27 to an applicant is not refunded within 3 months from the date of receipt of application there shall be paid to that applicant interest at such rate, not below 5% and not exceeding 30% per annum as is for the time being fixed by the Central Government by Notification in the Official Gazette, on such duty from the date immediately after the expiry of 3 months from the date of receipt of such application till the date of refund of such duty.

Application for refund - scrutiny

Regulation 2 of Customs Refund Application (Form) Regulations, 1995 provides that the application for refund submitted by the assessee, shall be scrutinized for its completeness by the Proper Officer and if the application is found to be complete in all respects, the applicant shall be issued an acknowledgement by the Proper Officer in the prescribed Form appended to these regulations within ten working days of the receipt of the application.   Where on scrutiny, however, the application is found to be incomplete, the Proper Officer shall, within 10 working days of its receipt, return the application to the applicant, pointing out the deficiencies. The applicant may resubmit the application after making good the deficiencies, for scrutiny.

For the purposes of payment of interest under section 27A of the Act, the application shall be deemed to have been received on the date on which a complete application, as acknowledged by the Proper Officer, has been made.

In V.R. OVERSEAS PVT. LTD. VERSUS COMMISSIONER OF CUSTOMS (PORT) & ANR. - 2023 (3) TMI 652 - CALCUTTA HIGH COURT the petitioner has filed 16 separate refund applications under Section 27(1)(a) of the Act for refund of excess payment of duty to the tune of Rs.1,40,49,995/- between the period 06.06.2018 to 04.03.2020.  The said applications were duly acknowledged by the Department.  The refund was made to the petitioner.  But the petitioner claims that the refund has been after a lapse of more than 90 days for which the petitioner is entitled for receiving the interest for the delay refund.  The request for interest was rejected.  The Appellate Authority allowed interest.  Since the same was not paid the petitioner filed the present writ petition before the High Court with the prayer that the High Court may direct the authorities to pay Rs.3,05,414/- to the petitioner as interest under Section 27A of the Act.

The main contentions of the petitioner before the High Court as below-

• The refund applications were duly received by the Department and the same was duly acknowledged by the department.
• When there is deficiency in the refund application it ought to be returned within 10 days from the date of receipt of refund application.
• After a lapse of 8 months the Authorities made queries and directed for supply of documents.  The petitioner responded to these queries.
• Interest provision becomes applicable after 90 days of receipt of application under section 27A of the Act. 
• Since the Department has retained the refundable amount for a prolonged period and had unjust gain at the cost of the petitioner it should be made liable to pay interest on interest as damages.

The Department submitted the following before the High Court-

• Upon scrutiny of the applications it was fund that most of the refund applications were incomplete and several relevant documents were missing.
• Deficiency memos were issued to the petitioner requesting to supply the required documents.
• Because of the undue delay in submitting the required documents, there was delay in refund of the application.
• The refund for 14 applications was processed within 3 months from the complete submission of the relevant documents.
• An application for refund can be treated as an application for refund only when it is supported by all the requisite statutory documents.
• The explanation to Regulation 2 provides that payment of interest under Section 27A of the Act the application shall be deemed to have been received on the date on which a complete application, as acknowledged by the proper officer, has been made.
• Even if it is assumed that the authority has issued the deficiency memo beyond the prescribed period but the moment the petitioner has replied to the said deficiency memo the petitioner has waived its right to challenge the same and cannot raise any dispute at this belated stage.
• No interest is payable under Section 27A of the Act on the refund claim when the refund has been sanctioned within the prescribed period of 3 months from the date of receipt of all requisite documents along with the refund application.

The High Court considered the facts and circumstances of the case the High Court disposed the writ petition by holding as below-

• The interest claimed by the petitioner for the delayed refund cannot be granted for the reason that section 27A of the Act provides the condition that a person is entitled for the refund on fulfilling the conditions contained in section 27A.  In this case it is disputed that the refund applications by the petitioner was made in proper form and manner as prescribed under the Act and the rules made there under.
• Since this issue is disputed question of fact and requires appreciation of evidence, writ court cannot act as evidence scrutinizing authority over those applications and attached documents.
• The application for refund cannot be accepted automatically and the authority has been empowered to scrutinize for its completeness and the application shall be deemed to have been received only on the date on which a complete application has been submitted along with the requisite documents.  In this case the required documents were supplied by the petitioner belatedly.
• The petitioner is entitled to get interest on delayed refund for the period from the date of expiry of statutory period till the date of actual payment of refund. 

The High Court directed the authorities to make payment of interest to the petitioner if any amount of interest is found due after verification from record and after taking into consideration the discussion, observation and law laid down in the present judgment.