2008 (7) TMI 341 - AT - Customs

Tribunal Rules No Interest on Interest in Customs Refund Cases

The Tribunal overturned the Commissioner (Appeals)'s decision and upheld the Revenue's appeal regarding interest on the delay in refund of an amount ... Issue involved is interest for the period of delay in refund of an amount collected as interest on duty under Section 47(2) of the Customs Act, 1962 - whether the Respondents are entitled for interest on such refund from the date of payment till the date of its refund - Section 27A is applicable to only delay in refund of Customs duty - there is no provision for payment of interest on delay in refund of interest - Commissioner (Appeals)’s order allowing interest on the interest amount under Section 47(2) from the date of deposit till the date of its refund is, therefore, not sustainable Issues:- Appeal against Commissioner (Appeals)'s order regarding interest on delay in refund of an amount collected as interest on duty under Section 47(2) of the Customs Act, 1962.Analysis:1. The case involved the Revenue's appeal against the Commissioner (Appeals)'s order concerning interest on the delay in refund of an amount collected as interest on duty under Section 47(2) of the Customs Act, 1962. Despite repeated notices, the Respondents did not appear during the hearing, prompting the case to proceed without further delay.2. The issue revolved around the interest for the delay in refund of an amount collected as interest on duty under Section 47(2) of the Customs Act, 1962. The Respondent imported cloves but filed Bills of Entry after the prescribed 30-day period. The Revenue demanded interest on the duty chargeable on the goods, which the Respondents paid. Subsequently, the Respondents sought a refund of the interest amount, which was partially granted by the Deputy Commissioner but denied by the Commissioner (Appeals). The main contention was whether interest on the amount deposited by the Respondents should be paid from the date of deposit till the date of refund.3. The Revenue argued that there is no provision in the Customs Act for payment of interest on interest, especially from the date of payment. Refund was sanctioned within three months of the claim filing, negating the need for additional interest payment. Citing a Tribunal judgment, the Revenue contended that interest on delayed payment of interest is not permissible under the law, as it would exceed the powers conferred by the Act.4. The Tribunal analyzed the provisions of the Customs Act, particularly Section 27A, which governs interest on delay in duty refunds exceeding three months. However, since the case pertained to the refund of interest charged under Section 47(2) and not customs duty, Section 27A was deemed inapplicable. Referring to precedent, the Tribunal emphasized that Customs authorities must operate within the statutory framework and cannot grant interest on delayed payment of interest without specific legal provisions. Consequently, the Commissioner (Appeals)'s decision to allow interest on the interest amount from deposit to refund date was overturned, and the Revenue's appeal was upheld.