Customs - Interest on Delayed payment is compensatory
THIS is a long case. An importer realised that he paid the Customs duty, even though he was eligible for an exemption. He promptly filed a refund claim of Rs.1,06,74,049/- on 24.12.1998 and it was promptly rejected.
The Commissioner (Appeals) allowed the appeal but ordered crediting the refund amount to the Consumer Welfare Fund on the ground of unjust enrichment.
Appeal against the said order was allowed by the Tribunal vide order dated 27.07.2005 in favour of the appellant by holding that the refund claim is not hit by the principles of unjust enrichment.
The Revenue appeal against the Tribunal order was dismissed by the High Court on 01.04.2010. Revenue took the matter to the Supreme Court, where also it lost the case on 21.02.2011.
The importer approached the Customs for refund with interest - twelve years after filing the first refund claim.
The Department was kind enough to grant refund but not interest.
The Commissioner (Appeals) upheld the rejection of interest on the ground that the refund amount has been sanctioned within three months from the date of judgment of Hon'ble Supreme Court in dismissing the Special Leave Petition (SLP) filed by the department; and that for a substantial period, the amount was lying with the Consumer Welfare Fund and not with the department.
The importer is again before the Tribunal.
The Tribunal observed, "The observations by the Commissioner (Appeals) in the impugned order that since, for a considerable time, the refund amount was lying with the Consumer Welfare Fund and not with the department, and therefore, no interest is payable to appellant, in absence of any delay of sanction of refund amount, is implausible and is contrary to the statutory provisions. The object behind insertion of interest provisions in Section 27A of the Act is that interest is compensatory in character."
The Tribunal allowed the appeal with consequential benefits.