2015 (10) TMI 1099 - HC - Customs

Court Upholds Interest Entitlement on SAD Refund, Denies Departmental Denial of Interest

The court condoned a 10-day delay in filing the appeal and upheld the entitlement to interest on the refund of Special Additional Duty (SAD) under ... Claim of interest of refund of SAD - refund was granted beyond period of three months - Section 27A - refund under Notification No. 102/2007 – Revenue contends that refund under Notification No. 102/2007 was not governed by Section 27 thus Section 27 A would also not apply. Held That:- Notification no.102/2007 under Section 25(1) of the Act exempts goods described in First Schedule of the CTA from whole of additional duty of customs leviable under Section 3 (5) of the CTA - Imposition of a period of limitation for the first time through a notification 'without statutory amendment' was legally impermissible. Department was not justified in denying interest to Respondent on the delayed refund of SAD by resorting the para 4.3 of the CBEC’s Circular No.6/2008 - No error committed by CESTAT in allowing the appeal of the Respondent and ordering interest on the amount of SAD determined to be refunded, in terms of Section 27A of the Act – Decided in favour of the Respondent. Issues Involved:1. Delay in filing the appeal.2. Entitlement to interest on the refund of Special Additional Duty (SAD).3. Applicability of Sections 27 and 27A of the Customs Act, 1962 to refunds under Notification No. 102/2007.4. Validity of CBEC Circular No. 6/2008 in denying interest on delayed refunds.Issue-wise Detailed Analysis:1. Delay in Filing the Appeal:The court condoned the delay of 10 days in filing the appeal, citing the reasons stated in the application. The application for condonation of delay was disposed of accordingly.2. Entitlement to Interest on the Refund of Special Additional Duty (SAD):The substantial question of law addressed was whether an importer is entitled to interest beyond three months under Section 27A of the Customs Act, 1962, on the refund of SAD under Notification No. 102/2007. The court examined whether the absence of a specific provision for interest in the notification, as clarified in Para 4.3 of Circular No. 6/2008, affects the entitlement to interest.3. Applicability of Sections 27 and 27A of the Customs Act, 1962 to Refunds under Notification No. 102/2007:The court noted that the word 'duty' as defined in Section 2(15) of the Act includes all kinds of customs duty. Section 3(8) of the Customs Tariff Act (CTA) states that the provisions of the Customs Act, including those related to refunds and interest, apply to SAD. Therefore, Sections 27 and 27A of the Customs Act concerning refunds and interest on delayed refunds apply to SAD levied under Section 3 of the CTA.The court referenced the case of Sony India Pvt. Ltd. v. The Commissioner of Customs, where it was held that subordinate legislation, such as a circular, cannot impose a limitation period without statutory amendment. Therefore, the imposition of a period of limitation through a notification without statutory amendment was deemed legally impermissible.4. Validity of CBEC Circular No. 6/2008 in Denying Interest on Delayed Refunds:The court examined the validity of Para 4.3 of CBEC Circular No. 6/2008, which stated that in the absence of a specific provision for payment of interest under the notification, interest does not arise for these claims. The court found that Circular No. 6/2008, to the extent that it seeks to deny interest on the refund of SAD, is inconsistent with and ultra vires Section 27A of the Customs Act.Conclusion:The court concluded that the Department was not justified in denying interest on the delayed refund of SAD by resorting to Para 4.3 of CBEC Circular No. 6/2008. The CESTAT's order directing the payment of interest on the refunded amount was upheld, and the appeal was dismissed. The court found no grounds for interference with the impugned order of the CESTAT.