Interest on delayed customs refund applies to duty, not to security deposits, under Section 27A.

Interest under Section 27A of the Customs Act, 1962 applies only to delayed refund of duty and not to refund of a security deposit. On the facts, the amount treated as security deposit did not qualify for interest, while the amount accepted as duty attracted interest because its refund was delayed. Interest was therefore denied on the security deposit and allowed only to the extent the refunded amount represented duty.

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Issues: Whether interest was payable on delayed refund of amounts paid as security deposit and as duty under the Customs Act, 1962.

Analysis: The amount of Rs. 9,70,865/- was found to be a security deposit, and Section 27A of the Customs Act, 1962 was held to provide interest only on delayed refund of duty and not on delayed refund of a security deposit. The amount of Rs. 4,52,735/- was accepted as duty, and since its refund was delayed, interest was held admissible on that amount.

Conclusion: Interest was not payable on the refunded security deposit, but interest was payable on the delayed refund of the amount representing duty, in favour of the assessee to that extent.

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