Export duty refund ordered for low-Fe shipments; erroneous 2007-08 assessments overturned, interest at 12% awarded

CESTAT Kolkata allowed the appeal, holding that export duty was erroneously finalized at Rs. 300 PMT despite test reports consistently showing Fe content below 62%, attracting duty of only Rs. 50 PMT. The Tribunal held that the assessment orders, passed in 2007-2008 without any plausible basis contrary to the available test reports, were unsustainable. It affirmed that the refund accrued to the appellant from the dates of such erroneous final assessments and that prolonged inaction by the Revenue could not defeat this entitlement. Consequently, CESTAT directed grant of refund along with interest at 12% per annum from the respective dates of assessment until the date of actual refund.

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1. ISSUES PRESENTED AND CONSIDERED

(1) Whether interest is payable on the refund arising from re-determination of export duty on iron ore fines, where finalisation of assessments was erroneous and/or unduly delayed.

(2) If interest is payable, what is the relevant date from which such interest becomes due.

(3) What is the appropriate rate of interest payable on the refunded amount.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1 - Entitlement to interest on refund consequent to erroneous/delayed finalisation of export duty assessments

Legal framework (as discussed)

(a) Section 18(4) of the Customs Act, 1962 - interest on amounts refundable pursuant to final assessment, if not refunded within three months from the date of final or re-assessment.

(b) Section 27 and Section 27A of the Customs Act, 1962 - refund and interest on delayed refund.

(c) Notification No. 62/2007-Cus dated 03.05.2007 - concessional export duty @ Rs. 50 PMT where Fe content is less than 62%.

(d) Supreme Court decision in Union of India v. Gangadhar Narsingdas Agarwal and CBIC Circular No. 04/2012-Cus - Fe content for export duty to be determined on wet (natural) basis.

(e) CBIC Circular No. 12/2014 - guidelines for uniform assessment of export of iron ore fines and pellets, including reliance on load port/discharge port test reports, contracts, invoices and BRCs.

(f) Supreme Court decisions in Ranbaxy and Sandvik Asia (relied upon in earlier final order cited and applied) - interest payable under Section 27A on delayed refund and consequences of inordinate delay/retention of amounts by Revenue.

Interpretation and reasoning

(g) The Tribunal notes that, according to the Department's own affidavit before the High Court, all 14 shipping bills were "finally assessed" in 2007-2008, and that CRCL test reports for Fe content were available prior to such finalisation dates.

(h) The CRCL reports, reproduced and tabulated in the order, show Fe content below 62% (on dry basis) for all shipments. Applying the Supreme Court ratio and CBIC Circulars, the Fe content in wet condition is necessarily below 62%, warranting export duty @ Rs. 50 PMT under Notification No. 62/2007-Cus.

(i) Despite availability of these test reports and the legal position settled by the Supreme Court and CBIC Circulars, the assessing officer finalised the assessments by levying duty @ Rs. 300 PMT. The Tribunal characterises this as a "grave lapse" and "deliberate erroneous action" in ignoring the CRCL reports.

(j) The Tribunal emphasizes that no speaking orders were issued; the assessments were not communicated to the exporter; and, despite repeated representations, personal hearings, RTI applications and higher-level representations, no corrective orders were passed until the High Court directed supply of the assessment orders in 2023.

(k) The Commissioner (Appeals), on appeal, re-examined the full evidentiary record - CRCL reports, load port and discharge port test reports, final invoices, contracts, BRCs and CA certificates - and held that Fe content in all 14 shipments on wet basis was below 62%, hence export duty was correctly chargeable only @ Rs. 50 PMT, granting refund of Rs. 250 PMT but denying interest.

(l) The Tribunal holds that the Commissioner (Appeals) merely corrected the earlier erroneous assessment; the right to refund of the excess Rs. 250 PMT arose on the original dates of final assessment in 2007-2008, when, in law and on facts, the officer was duty bound to apply the concessional rate on the basis of CRCL reports.

(m) The Tribunal rejects the Revenue's invocation of Section 18(4) as a shield to deny interest. It reasons that Section 18(4) only stipulates that interest is payable if refund is delayed beyond three months from the date of final assessment; it does not authorise denial of interest where there is erroneous finalisation or non-application of binding law and test reports.

(n) Following its own earlier Final Order No. 75019/2025 (in the same assessee's case on similar facts) and relying on Ranbaxy and Sandvik Asia, the Tribunal holds that the provisions of Section 27A are attracted: the excess amount (Rs. 250 PMT) remained with the Revenue due to illegal/erroneous assessment and was refunded only after long delay; therefore, interest on delayed refund is payable.

Conclusions

(o) The Tribunal holds that the assessee is entitled to interest on the refunded excess export duty of Rs. 250 PMT for all 14 shipping bills.

(p) Section 18(4) cannot be used to deny interest in a situation where the assessments were incorrectly finalised at Rs. 300 PMT despite clear CRCL reports and settled law showing eligibility to Rs. 50 PMT; instead, Section 27A governs interest on such delayed refund.

Issue 2 - Relevant date from which interest becomes payable

Interpretation and reasoning

(q) The Tribunal notes from the Department's own affidavit and tabulated data that for each shipping bill: (i) CRCL test report date; and (ii) date of final assessment by the original assessing officer are both on record.

(r) The Tribunal observes that on each "date of final assessment" (Column F of the table at para 23), the assessing officer already had the CRCL report showing Fe below 62%. On those dates, the officer was legally obliged to finalise export duty @ Rs. 50 PMT; hence, on each such date, the right to refund of excess Rs. 250 PMT accrued.

(s) Treating the date of correct final assessment (i.e., the actual final assessment date in Column F, had the law been properly applied) as the "date of filing of the refund claim" for purposes of interest computation, the Tribunal applies the statutory three-month grace period. Interest becomes payable from the expiry of three months from each such date.

(t) Accordingly, in the tabulation at para 23, Column H specifies that interest shall run "3 Months from the date given at Col F" for each of the 14 shipping bills.

(u) The Tribunal reiterates its reasoning in the earlier Final Order No. 75019/2025 that once the date on which refund ought to have been granted is identified, the three-month period under Section 27A (read with Section 18 where applicable) is reckoned from that date, and interest runs thereafter until actual refund.

Conclusions

(v) For each of the 14 shipping bills, the "relevant date" for commencement of interest is the date falling three months after the original erroneous final assessment date shown in Column F of the table at para 23.

(w) Interest is payable from those respective dates (Column H) until the date on which the refund was actually disbursed.

Issue 3 - Rate of interest payable on delayed refund

Legal framework (as discussed)

(x) Section 27A of the Customs Act, 1962 - interest on delayed refunds at the rate notified by the Central Government.

(y) Reliance on precedents: Parle Agro Pvt. Ltd. v. Commissioner, CGST, Noida; Commissioner of Central Excise, Panchkula v. Riba Textiles Ltd.; Churchit International v. CC (Export), and others considered in the earlier Final Order No. 75019/2025.

Interpretation and reasoning

(z) The Tribunal notes that in the earlier Final Order No. 75019/2025, on substantially identical facts (same exporter, iron ore fines, excess export duty retained for long period), it held that the excess duty retained by the Revenue is akin to amounts retained during investigation and that, following the cited case law, interest @ 12% per annum was appropriate.

(aa) The Tribunal reiterates and applies that reasoning here, observing that the amount of Rs. 250 PMT remained with the Revenue solely due to its own erroneous action and was refunded only after about 14 years. In such circumstances, and in line with the prior order and the cited High Court/Tribunal decisions, a rate of 12% per annum is justified.

Conclusions

(ab) The Tribunal holds that interest on the refunded amount is payable @ 12% per annum.

(ac) Such interest @ 12% p.a. shall be computed from the dates indicated in Column H of the table at para 23 (three months from each original final assessment date) until the date of actual refund, and shall be paid within eight weeks from the date of communication of the Tribunal's order.

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