Interim restitution interest on refunded customs duty is not recoverable on the full amount when final adjudication reduces the duty basis.

Interest on a refunded customs duty amount under an interim restitution order cannot be claimed on the full sum where the final outcome of the substantive dispute substantially reduces the basis on which that refund was calculated. The Supreme Court's earlier result had reduced the assessable value, so the duty component linked to the disputed additions was not fully sustained. On that footing, the Department was not entitled to recover interest at 18% per annum on the entire refunded amount for the interim period. The Court left open the broader question of whether interest was chargeable under the Customs Act, 1962 as it stood in 1988.

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Issues: Whether the Department was entitled to recover interest at 18% per annum on the refunded amount of Rs. 6.02 crores for the period covered by the interim order of the Supreme Court.

Analysis: The dispute arose from an interim order permitting refund against a bank guarantee with a further direction for restitution with interest if the Department succeeded. The Court held that the controversy had to be viewed in the context of the ultimate result of the earlier appeal, in which the importer substantially succeeded and the assessable value was reduced. Since the duty component of Rs. 6.02 crores was linked to additions in assessable value that were not fully sustained, the Department could not claim interest on the entire refunded amount for the intervening period. The Court also declined to go into the wider question of chargeability of interest under the Customs Act, 1962 as it stood in 1988, and kept that larger issue open.

Conclusion: The Department was not entitled to interest at 18% per annum on Rs. 6.02 crores for the period 28-10-1991 to 10-7-1997 under the interim order dated 9-9-1991.

Ratio Decidendi: Where the final outcome of the substantive dispute substantially reduces the very basis on which the refunded sum was calculated, interest cannot be claimed on the entire refunded amount under an interim restitution order unless the liability is clearly sustained on the final adjudication.

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