Restitution for wrong excise classification: refund allowed with interest for delayed repayment of the refundable duty.

Excise duty collected on a classification later held unsustainable became refundable on the principle of restitution, because the appellate decision in favour of the assessee had operated without any stay. The Court held that the petitioner was entitled to refund of the duty recovered on the earlier tariff classification, and that delayed payment justified interest on the refundable amount. Interest was awarded at a reduced rate of 12% per annum from 5-10-1987, and the refund was directed against furnishing of a bank guarantee, with each side bearing its own costs.

---

---

Issues: (i) whether the petitioner was entitled to refund of excise duty recovered on the classification of tyre cord under Tariff Item No. 68, and (ii) whether interest was payable on the refundable amount and, if so, at what rate and from what date.

Issue (i): entitlement to refund of excise duty recovered on the basis of the earlier classification.

Analysis: The classification dispute had already been decided in appeal in favour of the petitioner, and no stay of that appellate order had been granted. Once the goods were held classifiable under Tariff Item No. 18, the duty collected on the contrary footing became refundable on the principle of restitution, and the quantum of refund was not in dispute.

Conclusion: The refund of the excise duty was held to be payable in favour of the petitioner.

Issue (ii): liability to pay interest on the refundable amount.

Analysis: The refund application had remained unpaid for a substantial period, causing loss of use of money to the petitioner. The Court therefore found it to compensate that loss by awarding interest, but at a reduced rate from the date of the writ petition rather than the date of deposit.

Conclusion: Interest was awarded in favour of the petitioner at 12% per annum from 5-10-1987.

Final Conclusion: The writ petition succeeded, and the respondents were directed to refund the excise duty with interest, against the furnishing of a bank guarantee, with the parties left to bear their own costs.

Ratio Decidendi: Where duty has been collected on a classification later held unsustainable and no stay operates against that decision, the assessee is entitled to restitution by refund, and reasonable interest may be awarded for delayed payment of the refundable amount.

---