Interest on delayed refunds – catch 22?
The Central Excise department is very fussy about interest. If you pay the duty a little late, they will pounce on you for interest. To be fair to them, the law provides for interest when they delay your refunds – though the rate is less and the time is short, it is a fact that they are bound to pay you interest. Sometime back the Board had circulated a missive that the interest payable for delayed refund will be recovered from the officers concerned. This was obviously meant to alert the staff to the need of granting the refund promptly. What happens when the courts order refund with interest and the interest to be recovered from the staff? What will happen if the interest runs into Crores, which cannot be recovered from the salaries of the officers for a few decades?
What happens when huge interest is to be paid? For fear of recovery from the staff, the department will not give the refund at all and fight the case all the way up to the Supreme Court and by the time the number of officers responsible for the delayed refund will run into hundreds and no responsibility can be fixed and no recovery made. We report one such case today where the refund is 10 Crores!
But is the officer delaying the refund doing a service to the department? The interest payable on delayed refund is 6%. Certainly the government can earn more than 6% on the money retained (illegally). So the officer delaying the refund is actually doing a fiscal service to the department and he should be rewarded instead of punishing him with recovery of interest. Please see our Guest Column today for an interesting article on the subject.
Similarly our Audit and Preventive groups who force the assessees to make spot payment of the disputed duty are doing a great disservice to the department. If the assessee does not make that spot payment, he can be made to pay interest at 13% with a mandatory penalty equal to the duty. The officers who force spot payments are spoil sports who ruin the cause of government revenue and so deserve to be punished. Strange are the ways of the government – the one who saves money is punished and the one who squanders it away is appreciated. Government business is no business.