2019 (7) TMI 62 - HC - Customs

Interest on delayed refund - whether the interest on delayed refund under Section 27A of the said Act is payable on expiry of period of three months from the date of receipt of refund application or whether interest is payable from the date on which the order for refund is actually made or confirmed? - HELD THAT - From the perusal of the provisions under Section 11BB of the Central Excise Act and Section 27A of the said Act, with which we are concerned, it is apparent that the provisions are pari materia. Therefore, interpretation put on the provisions of Section 11BB of the Central Excise Act will equally apply to the interpretation of provisions of Section 27A of the said Act - In the facts of the present case, we find no justification whatsoever on the part of the respondents for denying the petitioners interest on delayed refund amount for the period between 11th January 2008, i.e., three months after the expiry of receipt of refund applications dated 10th October 2007 till the date of actual refund, i.e., 16th August 2017. Accordingly, writ of mandamus as prayed for by the petitioners is liable to issue. In the present case, the petitioners made deposits in pursuance of express directions issued by the DGFT simply because there was some delay on the part of the petitioners in complying with the export obligation. Thereafter, such amounts were appropriated by the respondents on basis of orders that the petitioners had breached the terms and conditions of the Advance Licenses under Notification No. 204 of 1992. Such orders were ultimately set aside after it was found that the petitioners had committed no breaches. Accordingly, the respondents were duty bound to refund the amounts deposited by the petitioners and sanction for such refund has already been granted. Petition allowed.

Summary

Issues Involved:
1. Whether interest on delayed refund under Section 27A of the Customs Act, 1962 is payable from the expiry of three months from the date of receipt of the refund application or from the date the refund order is made or confirmed.

Issue-wise Detailed Analysis:

1. Interest on Delayed Refund under Section 27A of the Customs Act, 1962:
The petitioners sought a writ of mandamus to direct the respondents to sanction and grant interest on the refund amount from the expiry of three months from the date of the refund application (10th October 2007) until the actual refund date (16th August 2017) under Section 27A of the Customs Act, 1962. The main issue was whether interest is payable from three months after the refund application date or from the date the refund order is made.

2. Factual Background:
The petitioners were issued two quantity-based Advance Licenses on 23rd January 1995, allowing duty-free import of goods under Notification No. 204 of 1992. Due to a delay in fulfilling export obligations, the petitioners paid certain penalties and deposited amounts as directed by the Director General of Foreign Trade (DGFT). The Customs Authorities disputed the exports, leading to multiple legal proceedings. Ultimately, the Appellate Tribunal allowed the petitioners' appeal on 22nd March 2007, making them eligible for a refund of the deposited amounts. The petitioners filed refund applications on 10th October 2007, but the Assistant Commissioner delayed the refund, citing pending appeals. The High Court directed the Assistant Commissioner to decide on the refund applications, which were eventually sanctioned without interest. The petitioners sought interest for the period from 11th January 2008 to 4th December 2016.

3. Petitioners' Argument:
The petitioners' counsel argued that the issue is covered by the Supreme Court's decision in Ranbaxy Laboratories Ltd. vs. Union of India, which held that interest under Section 11BB of the Central Excise Act, 1944 (pari materia to Section 27A of the Customs Act) becomes payable if the refund is not made within three months from the application date. The Bombay High Court in Shelf Drilling International Inc. vs. Union of India also applied this interpretation to Section 27A of the Customs Act, criticizing the Customs Department for delaying refunds and denying interest.

4. Respondents' Argument:
The respondents' counsel contended that the petitioners deposited the amounts due to a delay in fulfilling export obligations and that interest on delayed refund of pre-deposit is payable only from the refund order date. The respondents relied on cases like Commissioner of Central Excise, Hyderabad vs. I.T.C. Ltd., arguing that these principles apply to the present case.

5. Court's Analysis and Decision:
The Court held that the issue is entirely covered by the Supreme Court's decision in Ranbaxy Laboratories Ltd., which mandates that interest becomes payable three months after the refund application date. The Court noted that Section 11BB of the Central Excise Act and Section 27A of the Customs Act are pari materia, and the interpretation of Section 11BB applies to Section 27A. The Court found no justification for denying interest from 11th January 2008 to 4th December 2016 and issued a writ of mandamus accordingly.

6. Rejection of Respondents' Contention:
The Court rejected the respondents' argument that the petitioners' case involved a deposit of duty, distinguishing it from pre-deposit refund cases. The petitioners' deposits were made due to DGFT's directions and were later appropriated based on orders that were ultimately set aside. Therefore, the petitioners were entitled to a refund with interest.

7. Consideration of Alternate Remedy:
The Court addressed the issue of alternate remedy, emphasizing the petitioners' prolonged efforts to secure refunds and the respondents' failure to apply correct principles. The Court decided not to relegate the petitioners to alternate remedies due to the chequered history of the case and the potential prejudice to the petitioners.

Conclusion:
The Court allowed the petition, directing the respondents to pay interest on the refund amount for the period from 11th January 2008 to 4th December 2016, modifying the impugned orders accordingly. The interest amount was to be computed and paid within two months from the date of the order's upload. No order as to costs was made.