2018 (2) TMI 36 - HC - Customs

Entitlement of interest - relevant date for calculation of interest - Refund claim rejected on the ground of unjust enrichment - Section 27 and 27(A) of the Customs Act 1962 - Held that - issue is covered by the decision in the case of Ranbaxy Laboratories Ltd. Versus Union Of India and Ors. 2011 (10) TMI 16 - Supreme Court of India where it was held that liability of the revenue to pay interest under Section 11BB of the Act commences from the date of expiry of three months from the date of receipt of application for refund under Section 11B(1) of the Act and not on the expiry of the said period from the date on which order of refund is made - Even assuming that the petitioner furnished the evidence with respect to the issue of unjust enrichment later it would make no difference as Section 27A mandates the payment of interest from the date of the application. The revenue in any case does not suffer any loss as it has the benefit of the use of the money in fact even prior to the date of the filing of the application for refund under Section 27(1). The petitioner shall be paid interest from 23.10.2007 i.e. 90 days after the date of the application under Section 27(1) viz. 23.07.2007 till payment - petition allowed.

Summary

Issues:
1. Claim for interest on duty refund.
2. Interpretation of Sections 27 and 27A of the Customs Act, 1962.
3. Application of interest on delayed refunds.
4. Comparison with similar provisions in the Central Excise Act, 1944.

Analysis:

1. The petitioner sought a writ of certiorari to challenge the rejection of its claim for interest on duty refund. The petitioner had imported goods, paid duty, and filed refund applications. The Assistant Commissioner initially rejected the refund due to undue enrichment, but subsequent appeals favored the petitioner, leading to the refund sanction.

2. The key issue revolved around the interpretation of Sections 27 and 27A of the Customs Act, 1962. Section 27 allows refund claims, while Section 27A deals with interest on delayed refunds. The petitioner argued for interest from the date of the application, while the respondents contended interest should start from the final order date.

3. The Court analyzed Section 27A in detail, emphasizing that interest should accrue from 90 days after the application date, as per the plain reading and intent of the provision. The Court rejected the respondents' reliance on the explanation and held that interest should be paid based on the application date, not the final order date.

4. Drawing parallels with the Central Excise Act, the Court referred to a Supreme Court judgment highlighting that interest on delayed refunds becomes payable after three months from the application date, not the refund order date. This comparison supported the petitioner's claim for interest from the application date under Section 27(1).

5. The Court concluded that the petitioner was entitled to interest from 90 days after the application date until payment. The judgment aligned with the petitioner's position, emphasizing that the revenue did not suffer losses and must pay interest as mandated by Section 27A. The respondents were directed to pay interest by a specified date, with no costs imposed on either party.