2021 (10) TMI 189 - HC - Customs

Interest on refund - refund has been sanctioned within the prescribed period of three months from the receipt of all the requisite documents - failure in filing refund claim after finalization of assessment - delay in refund of EDD - Section 27-A of the Act, 1962 - HELD THAT - The respondent-importer had not produced all required documents and this compelled the Department to issue a show-cause notice on 7.7.2017 notifying the importer that the claim of refund will be rejected for non-submission of the documents. Pursuant to the show-cause notice, the importer has furnished 11 duplicate copies of bills of entries and four original copies of capital TR6 challans. It was found that the importer has produced these documents duly certified by Chartered Accountant only on 11.10.2017. The Department has sanctioned refund only after due verification of documents. The Appellate Authority having verified the documents and also having given its due consideration to the reasons assigned by the Original Authority concurred and affirmed the reasons assigned by the Original Authority. The Appellate Authority was also of the view that the refund is sanctioned well within the time of three months from the date of receipt of last document from the importer and therefore, question of awarding interest will not arise - the Tribunal has not at all a recorded finding indicating that the order passed by the original authority as well as the Appellate Authority suffers from perversity. The Tribunal has not even discussed the facts of the present case on hand. What emerges from the order passed by the Tribunal is that it has proceeded to order for payment of interest on the ground that the application is not decided within a period of three months. The contention of the respondent-importer that even if the application was defective, the same at the most may amount irregularity and hence, the Department cannot escape the liability of paying interest in terms of Section 27-A of the Act, 1962 is too far stretched and we are unable to accede to such a contention. The respondent-importer cannot be permitted to take undue advantage of lapses on his part in not submitting complete document to enable the Revenue to finalize the assessment before ordering for refund of 1% EDD. The present appeal are answered in affirmative i.e., in favour of the revenue and against the assessee.

Summary

Issues:
1. Whether interest is payable on the refund claim when sanctioned within the prescribed period?
2. Is the awarding of interest justified under Section 18(4) of the Customs Act, 1962?
3. Justification for relying on the decision of the Apex Court in a specific case.
4. Is the order of payment of interest justified when the refund was sanctioned within the prescribed period?

Analysis:
1. The respondent, a manufacturer of iron and steel products, imported goods and claimed a refund of extra duty deposit (EDD) paid. The claim was initially rejected due to the assessment not being finalized as per Section 18 of the Customs Act, 1962.

2. The respondent appealed the rejection, and after various proceedings, the refund was sanctioned without interest. The Appellate Authority upheld the decision citing that the refund was within the prescribed period of three months from the last document submission.

3. The respondent challenged this decision before the CESTAT, which relied on previous judgments to set aside the orders directing the payment of interest on the refund amount.

4. The appellant argued that the prescribed documents were submitted late, and the refund was sanctioned promptly after verification. The appellant contended that the CESTAT did not provide sufficient reasoning for its decision and merely relied on previous judgments.

5. The respondent argued that the delay in finalizing the assessment entitled them to interest under Section 27-A of the Act, 1962. They cited a judgment from the Madras High Court to support their claim.

6. The Court examined the sequence of events and found that the respondent failed to submit all required documents promptly, leading to a delay in the refund process. The Tribunal's decision to order interest payment solely based on the delay in processing the application was deemed incorrect.

7. The Court concluded that the Tribunal did not adequately consider the details and reasons provided by the lower authorities. The Tribunal's decision to award interest was overturned, and the appeal was allowed in favor of the revenue.

8. The judgment highlighted the importance of timely submission of required documents for refund processing and emphasized that delays caused by incomplete submissions cannot warrant interest payments.

9. The Court set aside the CESTAT's decision and ruled in favor of the revenue, stating that interest on the refund claim was not justified given the circumstances of the case.