Unlawful levy refund is not barred by limitation, and interest follows for wrongful retention of the money.

Countervailing duty collected on goods later found not liable to the levy was held to have been collected without authority of law under Article 265. The statutory limitation for refund under the Customs Act did not defeat the claim where the initial levy was illegal and without jurisdiction; the refund applications were therefore not barred by limitation and the refusal on that ground was unsustainable. As the respondents retained money collected unlawfully, interest was payable as compensation for its use during detention. Refund was ordered with interest at 10% per annum from the date of rejection of the refund applications until payment.

---

---

Issues: (i) whether the petitioners' refund claims for countervailing duty were barred by limitation despite the levy being without authority of law; (ii) whether interest was payable on the delayed refund.

Issue (i): whether the petitioners' refund claims for countervailing duty were barred by limitation despite the levy being without authority of law.

Analysis: The duty had been collected on goods which were found not to be liable to countervailing duty under the relevant tariff entry, and the later circular of the Central Board of Excise and Customs clarified that alcohol of all kinds was outside the scope of the levy. Under Article 265 of the Constitution of India, tax can be collected only by authority of law. Where the initial levy is illegal and without jurisdiction, the statutory limitation for refund under the Customs Act does not defeat the claim; at the least, the claim was made within time from the date when the petitioners acquired knowledge of the illegality after the circular was issued.

Conclusion: The refund applications were not barred by limitation and the rejection of refund on that ground was unsustainable, in favour of the assessee.

Issue (ii): whether interest was payable on the delayed refund.

Analysis: Since the respondents retained money that had been collected without authority of law, they had the benefit of the use of that amount during the period of retention. Interest was treated as compensation for such use and detention of money.

Conclusion: Interest at 10% per annum was payable on the refundable amount from the date of rejection of the refund applications until payment, in favour of the assessee.

Final Conclusion: The rejection of the refund claims was set aside, the applications were directed to be re-processed, and refund with interest was ordered.

Ratio Decidendi: Where duty is collected without authority of law, refund cannot be defeated by statutory limitation, and the payer is entitled to restitution with interest for wrongful retention of the money.

---