Interest on delayed customs refunds accrues three months after provisional assessment should have been finalised; refundant entitled to interest.

Where a provisional customs assessment was not finalised within the six month period prescribed by the Customs Manual and the delay in refunding excess duty is attributable to the Revenue, interest under the statutory refund-and-interest framework of the Customs Act is payable; interest is to be computed from three months after the date by which finalisation ought to have occurred and continues until actual refund. In prolonged retention cases analogous to pre-deposit or investigation retentions, an interest rate of 12% per annum was applied as the appropriate rate for the period of withholding.

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Issues: (i) Whether interest is payable to the appellant on refund granted after belated finalization of provisional assessment; (ii) If payable, from which date should interest run; (iii) If payable, what is the appropriate rate of interest.

Issue (i): Whether interest is payable to the appellant on the refund granted consequent to belated finalization of provisional assessment.

Analysis: The Tribunal examined the chronological record showing repeated requests by the appellant for finalization from 05.06.2009, personal hearings and written submissions in 2010, successive inaction by the adjudicating authority, a non speaking order in 2014, a remand in 2016, and ultimate redetermination in favour of the appellant by Commissioner (Appeals) in 2021 with refund sanctioned in 2022. The Tribunal applied the CBEC Customs Manual Chapter 7 Para 3.1 requirement of finalization well within six months for provisional assessments (applicable to pre 14.08.2018 cases), and relied on precedents (including Ranbaxy and Sandvik Asia) holding that interest is payable where refunds are belated due to revenue delay or unjustified withholding. The Tribunal held that the delay of over a decade was attributable to the Revenue and that Section 27/27A framework for refunds and interest under the Customs Act applies to the sanction of refund here.

Conclusion: Interest is payable to the appellant on the refunded amount because the Revenue caused inordinate delay in finalizing the provisional assessment and thereby in refunding the excess duty.

Issue (ii): If interest is payable, from which date should interest be computed?

Analysis: The Tribunal identified 05.06.2009 (appellant's request for finalization) and the subsequent personal hearing and written submissions completed by 15.02.2010. Applying the Customs Manual time frame (finalization within six months) the Tribunal held the assessment should have been finalized by 14.08.2010. Allowing the three month statutory period for triggering interest under Section 27A, the Tribunal concluded interest should commence after three months from the date by which finalization ought to have been completed, i.e. from 14.11.2010. This approach aligns with the reasoning in Ranbaxy (as to commencement of interest) and with the statutory scheme of Section 27/27A.

Conclusion: Interest shall be computed from 14.11.2010 until the date of actual refund payment (12.04.2022).

Issue (iii): If interest is payable, what rate of interest should apply?

Analysis: The Tribunal considered precedents dealing with refund of amounts paid under compulsion or during investigation and long retention by Revenue (including Sandvik Asia, Parle Agro, Riba Textiles and related Tribunal decisions). Those authorities endorse awarding interest at 12% per annum in cases where amounts were retained by the Revenue akin to pre deposit or payments made during investigation and later held refundable. The Tribunal found the excess export duty here was paid at the time of export and retained by the Revenue for a prolonged period without justification, analogous to the cited precedents.

Conclusion: Interest is awarded at the rate of 12% per annum from 14.11.2010 to 12.04.2022.

Final Conclusion: The appeal is allowed; the appellant is entitled to refund already sanctioned together with interest at 12% per annum from 14.11.2010 till 12.04.2022.

Ratio Decidendi: Where a provisional assessment is not finalized within the reasonable period mandated by the Customs Manual and resulting delay in refund is attributable to the Revenue, interest under Section 27A of the Customs Act is payable; interest commences after three months from the date by which finalization should reasonably have occurred and, in cases where the amount was retained akin to deposits during investigation, a 12% per annum rate is appropriate.

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