Interest Automatically Due on Late Refunds Says Tribunal, Orders Customs to Pay for Delayed Cement Fibre Maker Refund.

The Appellate Tribunal CESTAT Kolkata ruled in favor of the appellant, a manufacturer of Cement Fibre Sheet, regarding the payment of interest on a delayed refund under Section 18(4) of the Customs Act 1962. The Tribunal determined that interest is automatically payable if a refund is not issued within three months from the date of final assessment, regardless of whether a refund application is filed. Consequently, the Tribunal set aside the previous order and directed the customs department to pay interest for the delay in refunding beyond the stipulated three-month period.

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Issues:
Interest payable on delayed refund under Section 18(4) of the Customs Act 1962.

Analysis:
The judgment by the Appellate Tribunal CESTAT Kolkata involved a dispute regarding the payment of interest on a delayed refund under Section 18(4) of the Customs Act 1962. The appellant, a manufacturer of Cement Fibre Sheet, imported raw materials and filed Bills of Entry for clearance. The assessments were provisional under section 18(1)(a) of the Customs Act. Upon completion of the specified quantity of import, the assessments were finalized, and a refund was ordered to be paid. However, the refund was delayed, and no interest was paid to the appellant. The appellant contended that interest was automatically payable under Section 18(4) read with Section 27A of the Customs Act.

The department argued that the refund was sanctioned within the stipulated time period, and hence no interest was payable. The Tribunal analyzed Section 18(4) of the Customs Act, which mandates that if a refundable amount is not refunded within three months from the date of final assessment, interest is payable on the unrefunded amount. The section does not require the filing of a refund application for such refunds. Therefore, the Tribunal held that if the refund is not paid within three months from the final assessment, interest is payable for the delay in refund.

In conclusion, the Tribunal set aside the impugned order and allowed the appeal filed by the appellant, directing the department to pay interest for the delay in refund beyond three months from the date of final assessment. The judgment was pronounced in the open court on 26.11.2024.

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