Iron ore exporter wins refund appeal with 12% interest for 14-year Revenue delay in Section 154 rectification

CESTAT Kolkata allowed the appeal regarding refund of export duty paid by the appellant on iron ore exports. The tribunal held this was a Section 154 rectification case, not provisional assessment finalization, as the appellant had not opted for provisional assessment. The tribunal ruled that interest at 12% per annum was payable from 11.01.2011 to 05/06.09.2023, applying the Ranbaxy SC judgment. The rectification should have been completed within three months of the 11.10.2010 order directing rectification. The Revenue's 14-year delay in processing the rectification entitled the appellant to interest compensation on the erroneously collected excess export duty.

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The judgment involves a dispute over the refund of export duty paid by Vedanta Ltd. (formerly Sesa Goa Ltd.) on iron ore exports between June 2007 and March 2008. The primary issues revolve around whether the export duty assessment was provisional or final, whether the case involved rectification under Section 154 of the Customs Act, the entitlement to interest on the refund, and the applicable rate and period for such interest.

Issues Presented and Considered:

(a) Whether the assessment of export duty was provisional or final.

(b) Whether the case involved rectification of a final order under Section 154 of the Customs Act.

(c) Whether interest is payable on the refund of the export duty.

(d) If interest is payable, the relevant date from which interest should be calculated.

(e) The applicable rate of interest on the refund.

Issue-wise Detailed Analysis:

(a) Provisional vs. Final Assessment:

The appellant claimed the assessment was provisional, necessitating finalization. However, the Court found no indication of a provisional assessment request. The appellant's request for rectification under Section 154, supported by the Tribunal and High Court, indicated the assessment was final but required rectification due to errors.

(b) Rectification under Section 154:

The Court determined the case involved rectification under Section 154, as directed by the High Court and Tribunal. The rectification was necessary due to errors in the initial assessment, which did not consider moisture content in determining the Fe content, contrary to the Supreme Court's guidelines in the Gangadhar Narshingdas Agarwal case.

(c) Entitlement to Interest:

The Court held that interest was payable on the refund under Section 27A of the Customs Act, relying on the Supreme Court's decisions in Ranbaxy Laboratories Ltd. and Sandvik Asia Ltd. The appellant's money was unjustifiably withheld for over 14 years, entitling them to interest.

(d) Relevant Date for Interest Calculation:

The Court determined that the relevant date for interest calculation was 11.10.2010, the date of the Commissioner (Appeals) order directing rectification. Interest was payable from 11.01.2011, allowing three months for compliance, until the refund was paid on 5/6.09.2023.

(e) Rate of Interest:

The Court, referencing case laws like Riba Textiles and Parle Agro, held that the interest rate should be 12% per annum, considering the protracted delay and financial burden on the appellant.

Significant Holdings:

The Court concluded that the assessment required rectification under Section 154, entitling the appellant to a refund with interest. The interest was to be calculated from 11.01.2011 at a rate of 12% per annum, payable within eight weeks from the order's communication.

In summary, the Court allowed the appeal, granting interest on the refunded export duty at 12% per annum from 11.01.2011 to 5/6.09.2023, emphasizing the importance of adhering to judicial orders and the financial impact of prolonged delays on the appellant.

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