2022 (6) TMI 876 - HC - Customs

Refund of amount recovered by the respondents by invoking the Bank Guarantee, alongwith the interest - refund rejected on the ground of time limitation - Section 27 of the Customs Act - HELD THAT - After litigating in a court of law when orders are passed in favour of the petitioner, they are required to be complied with in letter and spirit. Untenable grounds seeking to question the entitlement of the petitioner, does not lie with the respondents. In case the submissions of the respondents were to be accepted, the same would result in overriding the orders passed by the CESTAT. The same is unacceptable - in the facts of the present case, the respondents were not justified in withholding the said payments. In view of the deliberate withholding of the payments, not only the amount is to be returned to the petitioner but they should also be liable to pay interest on the same. Entitlement for Interest - HELD THAT - Section 27-A of the Customs Act deals with refund of any claim which is liable to attract interest at the minimum of 5% and the maximum of 30%. The Parliament has enacted this law to ensure that the refunds should carry interest. It would imply that any money belonging to the petitioner, which is with the possession of the respondents, requires to be returned along with the rate of interest mentioned therein. Therefore, whether it is a refund of claim of tax or payment in terms of the order of the Tribunal, the petitioner should be entitled for the interest. Keeping in view the peculiar facts and circumstances involved and especially the objections as raised by the respondents, it is deemed just and necessary that the respondents be directed to pay interest at the rate of 10% per annum from the date of the CESTAT order till the date the payments are made to the petitioner. The said amounts shall be paid within a period of four weeks from today. Petition disposed off.

Summary

Issues involved:
1. Claim for duty drawback and penalties under the Customs Act.
2. Refund claim rejection by respondents.
3. Interpretation of Section 27 of the Customs Act.
4. Withholding of payment by respondents post CESTAT order.
5. Entitlement to interest on withheld payment.

Detailed Analysis:
1. The petitioner, a trader of textiles, exported goods and claimed duty drawback at ICD Mandideep. Subsequently, a notice was issued for confiscation of goods and penalties under the Customs Act. The final order directed confiscation, imposition of fines, and recovery from a Bank Guarantee. The order was challenged before CESTAT, which set it aside, entitling the petitioner to a refund of Rs.30 Lakhs. However, the respondents failed to comply, leading to a subsequent rejection of the refund claim by citing time limitation and merits. The petitioner filed a petition seeking release of the amount along with interest.

2. The respondents contended that the refund claim was barred by Section 27(3) of the Customs Act as the original order was set aside by CESTAT. They raised objections on merits as well. The court rejected this argument, emphasizing that the CESTAT's order mandated the return of the amount, not a refund. The respondents' failure to comply was deemed unjustifiable, and their objections were seen as attempts to delay payment and deny the petitioner's entitlement.

3. The court analyzed Section 27 of the Customs Act, highlighting that the provision does not apply to payments directed by judicial orders like CESTAT's. Referring to Section 27-A, which mandates interest on refunds, the court ruled that interest should be paid on the withheld amount at a rate of 10% per annum from the date of the CESTAT order until payment. This interpretation ensured the petitioner's entitlement to interest on the withheld sum.

4. The court criticized the respondents for withholding the payment post-CESTAT order, noting that compliance with judicial orders is mandatory. Any disputes, such as an alleged address error, were deemed irrelevant to withholding the payment. The court emphasized that respondents must adhere to judicial directives without delay or unjustified objections, ensuring timely and rightful payments to petitioners.

5. In conclusion, the court directed the respondents to pay interest at 10% per annum on the withheld amount from the CESTAT order date until payment, to be fulfilled within four weeks. The writ petition was disposed of, affirming the petitioner's entitlement to interest and emphasizing the necessity of complying with judicial orders promptly and without unjustified delays.