S.27A Customs Act | Interest On Delayed Refund Is Payable After Three Months Of Date Of Refund Application, Not From Date Of Order: Bombay HC
Pointing that the Department has delayed the refund on customs duty that was due & payable to assessee for almost ten years, the Bombay High Court ruled that such action of Department in avoiding the payment of interest on delayed refund by raising frivolous pleas, cannot be sustained. Referring to Supreme Court decision in Union of India Vs. Hamdard (Waqf) Laboratories [AIR 2016...
Pointing that the Department has delayed the refund on customs duty that was due & payable to assessee for almost ten years, the Bombay High Court ruled that such action of Department in avoiding the payment of interest on delayed refund by raising frivolous pleas, cannot be sustained.
Referring to Supreme Court decision in Union of India Vs. Hamdard (Waqf) Laboratories [AIR 2016 SC 1124], the High Court reiterated that the liability of the Revenue to pay the interest u/s 11BB, which corresponds to Sec 27A of the Customs Act, commences from the date of expiry of 3 months from the date of receipt of the application for refund or on the expiry of the said period from the date of which the order of refund is made.
The Division Bench comprising Justice M.S. Sonak and Justice Jitendra Jain observed that the respondent by misconceived construction of Section 27A of the Customs Act, cannot avoid payment of interest at the rate of 6% per annum, having retained and utilised the amount which was ultimately found to be refundable to the petitioner.
The Bench observed so while referring to Sec 27A of the Customs Act, which states that the period for calculating interest provided in the later part of the provision states that the starting point is the date of application.
Facts of the case:
The petitioner/ assessee, engaged in manufacturing water management products, filed a claim for a refund of SAD in the amount of Rs.7,40,458/- under Notification No. 102/2007–Cus dated Sep 14, 2007, which was rejected. The Commissioner (Appeals) set aside the rejection order and remanded the matter to the respondent for consecutive two times to consider again the petitioner's representation/application. Despite the same, the respondent kept delaying disposing of the petitioner's refund application. This forced the petitioner to file a grievance on the CPGRAMS portal. Still aggrieved, the petitioner approached the High Court after a delay of almost ten years. This resulted in direction to the respondent to allow refund of Rs.7,40,458/-, which was duly complied. However, the respondent failed to award any interest on the delayed refund. Hence, the petitioner approached the High Court seeking interest for delayed refund.
Observations of the High Court
The Bench found that the petitioner had to secure at least two remands only to adjudicate his refund claim application, and even after two remands, there was a delay in disposing of the refund claim application.
The Bench referred to the contention of the respondent that interest at the rate of 6% per annum is payable not upon expiry of three months from Aug 04, 2014 but only from Nov 08, 2022, i.e. three months from the petitioner's application, by which, the petitioner merely requested the respondent to follow the Commissioner (Appeals) order dated June 10, 2022 and decide the petitioners refund claim application.
However, the Bench pointed that such contention of respondent was not tenable, as the respondent has wrongfully retained and utilised the excess amount of Rs.7,40,458/- and top it all, raising untenable defences to deny interest at a rate of 6% per annum.
The Bench pointed that application claiming a refund of SAD amount of Rs.7,40,458/- on Aug 04, 2014, was never disputed by the respondent as incomplete or having deficiencies.
Referring to the decision of Madras High Court in Global United Shipping India (P) Ltd. Vs. Assistant Commissioner of Customs (Refund) [Writ Petition No. 17506 of 2019], the Bench reiterated that “an amount collected by Revenue without the authority of law or by the erroneous application of the provision of law, if retained by the Revenue all along without having any legal right to retain the same, such collection and retention would amount to unjust enrichment”.
The Bench emphasized that the petitioner was forced to litigate for the refund's recovery, and after the refund was sanctioned belatedly, the revenue, quite unreasonably, resisted interest payment on the delayed refund.
Thus, the High Court allowed the Assessee's petition and directed the Respondent to pay interest amounting to Rs.4,21,940/- on the delayed refund of SAD.
Counsel for Petitioner/ Assessee: Raminder Kaur
Counsel for Respondent/ Revenue: Karan Adik
Case Title: Ajay Industrial Corporation vs. Deputy Commissioner of Customs
Case Number: W.P No. 13314 of 2024