2025 (9) TMI 1004 - AT - Customs

Appeal allowed; matter remanded for fresh speaking order, consider existing stay and Section 27A delayed refund interest claim

CESTAT CHENNAI - AT allowed the appeal, set aside the impugned order and remanded the matter to the Original Authority to pass fresh, speaking orders ... Refund of additional duty of customs under sec. 3(5) of the Customs Tariff Act, 1975 - rejection of claim for interest on the delayed payment of refund - applicability of provisions of Section 27 or 27A of the Customs Act, 1962 - HELD THAT:- It is found that the department’s view is that the refund is granted by virtue of N/N. 102/2007-Cus. dated 14.09.2007 is a special procedure to grant SAD. While it contains a time limit for filing a claim for Additional Duty of Customs the notification has no provision to grant interest or to apply the provisions of Section 27 or 27A of the Customs Act, 1962. It is found that Boards Circular No. 6/2008- Customs dated 28.04.2008 was issued prescribing the procedure that may be adopted by the field formations to settle the refund claims arising out of the said exemption notification. While considering a similar issue of refund as per N/N. 102 of 2007-Cus dated 14.09.2007, in M.M. ENTERPRISES Vs COMMISSIONER OF CUSTOMS, CHENNAI-IV [2020 (1) TMI 384 - MADRAS HIGH COURT] the Hon’ble Court held that 'If there is delay in payment of any refund claim, the 2nd respondent is duty bound to pay the interest in terms of Section 27A of the Customs Act.' Nothing has been brought to our notice to indicate that the stay granted by the Division Bench in KSJ Metals Impex [2013 (6) TMI 148 - MADRAS HIGH COURT] has been vacated and final order passed or that the Hon'ble Supreme Court has decided the point of law involved. Hence judicial discipline requires that we follow the judgment passed in the case of M.M. ENTERPRISES and set aside the impugned order while remanding the matter to the Original Authority to pass fresh orders after considering the decision of the Hon’ble Division Bench of the Madras High Court in KSJ Metals Impex or the Hon'ble Supreme Court. After the issue of the said order by the court, the Ld. Original Authority shall follow the principles of natural justice and afford a reasonable and time-bound opportunity to the appellant to state their case both orally and in writing if they wish, before issuing a speaking order on the matter. Appeal disposed off. ISSUES PRESENTED AND CONSIDERED 1. Whether refund of Special Additional Duty (SAD) granted under a specific notification issued under section 25(1) of the Customs Act, 1962 constitutes a 'refund' within the meaning of Section 27 of the Customs Act so as to attract payment of interest under Section 27A for delayed refunds. 2. Whether a Board circular excluding payment of interest on refunds arising under the said notification (by stating that Section 27/27A do not apply) is valid and binding, or whether judicial decisions requiring application of Sections 27 and 27A control. 3. What is the appropriate remedy when there exists binding but stayed or pending higher court authority on the same question - specifically, whether the Tribunal should remand for fresh decision pending outcome of higher court proceedings and direct compliance with natural justice. ISSUE-WISE DETAILED ANALYSIS Issue 1: Applicability of Sections 27 and 27A to refunds under the Notification granting SAD exemption Legal framework: Sections 27 and 27A of the Customs Act deal respectively with refund of duties and payment of interest on delayed refunds. The notification in question (issued under section 25(1) of the Customs Act) prescribes a special procedure for refund of SAD and contains time limits for filing claims but contains no express provision excluding interest or specifically making Sections 27/27A inapplicable. Precedent treatment: High Court decisions have considered whether interest under Section 27A is payable on refunds under the notification. A division of the High Court quashed the part of the Board circular which purported to deny interest (in a judgment favoring applicability of Sections 27/27A). A subsequent High Court order in a later matter observed that delayed payment of refund attracts interest under Section 27A, subject to the stay that existed in the earlier decision. Interpretation and reasoning: The Tribunal accepts that the notification provides a special procedure to obtain exemption/refund but does not expressly exclude the statutory refund machinery (Sections 27/27A). The Tribunal places weight on High Court rulings that held paragraph(s) of the Board Circular (which sought to preclude interest) invalid insofar as they restricted interest claims. Absent clear legislative exclusion of Sections 27/27A from notification-born refunds, the statutory right to interest on delayed refunds remains engaged. The Tribunal notes that where the statute (Sections 27/27A) affords interest for delayed refunds, administrative instructions cannot curtail that statutory right. Ratio vs. Obiter: The Tribunal's holding that Sections 27 and 27A are applicable to refunds under the notification - as supported by High Court decisions - is ratio when taken as the legal conclusion necessary to determine entitlement to interest. Observations about the character of the notification as a 'special procedure' and the lack of an express exclusion are ancillary but relevant to that ratio. Conclusions: The Tribunal concludes that, on the authorities considered, refunds under the notification can attract interest under Section 27A unless a higher court definitively rules otherwise. Accordingly entitlement to interest cannot be foreclosed solely by the absence of an express provision in the notification or by departmental circulars purporting to deny interest. Issue 2: Validity and effect of Board Circular No. 6/2008 - whether it may lawfully deny interest on such refunds Legal framework: Executive circulars and instructions are subject to the statute and judicial review; they cannot override or curtail statutory rights conferred by the Customs Act. Precedent treatment: The High Court quashed the paragraph of the Board Circular that denied interest on refunds under the notification, holding that the circular could not restrict the statutory right to interest under Sections 27/27A. That judgment was subject to stay in an earlier case, but later High Court orders have continued to treat the issue as one where the circular cannot obliterate interest claims. Interpretation and reasoning: The Tribunal notes that the circular's statement that 'in the absence of specific provision for payment of interest... the payment of interest does not arise' was struck down by the High Court insofar as it sought to limit interest claims. The Tribunal reasons that departmental guidance cannot be read to exclude a clear statutory entitlement; hence the circular cannot be used as a valid basis for denying interest where Sections 27/27A apply. Ratio vs. Obiter: The finding that the particular paragraph of the circular is not authoritative to deny statutory interest follows directly from the High Court ruling and forms part of the Tribunal's operative reasoning (ratio) in ordering reconsideration; broader observations on the role of administrative instructions are obiter but consistent with the ratio. Conclusions: The Tribunal treats the circular's restrictive paragraph as invalid to the extent it bars interest; accordingly, reliance on that paragraph to refuse interest is not sustainable in light of the High Court decisions. Issue 3: Effect of pending or stayed higher court decisions and appropriate remedial order - remand, observance of judicial discipline, and natural justice on reconsideration Legal framework: Principles of judicial discipline require lower courts and tribunals to follow binding precedents of superior courts. Where a binding higher-court decision on the same subject is under stay or sub judice at a higher level, prudence may require remand or awaiting the higher court outcome. Administrative and adjudicatory proceedings must observe principles of natural justice when fresh decisions are to be taken. Precedent treatment: The Tribunal relied on recent High Court decisions which had (a) quashed the circular paragraph and (b) in another matter directed remand awaiting a division-bench decision in the prior case. The Tribunal identifies that the decision in KSJ Metals Impex was stayed by a Division Bench and the stay has not been shown to be vacated nor has the Supreme Court decided the point. Interpretation and reasoning: The Tribunal reasons that, given competing High Court rulings and a stay in related proceedings, judicial discipline requires following the most recent High Court direction (to consider Sections 27/27A) while acknowledging the prospective authority of a Division Bench/Supreme Court. Consequently, the Tribunal sets aside the impugned appellate order and remands the matter to the original authority with directions: await the Division Bench/Supreme Court outcome or decide afresh in light of those authorities; afford the claimant a reasonable, time-bound opportunity to be heard; and pass a speaking order expeditiously. Ratio vs. Obiter: The directive to remand for reconsideration in light of pending higher-court proceedings and to enforce natural justice is ratio in the context of disposing the present appeal. General comments on judicial discipline and procedural fairness are explanatory but supportive of the operative remand order. Conclusions: The Tribunal orders remand to the original authority to pass fresh orders after considering the Division Bench/Supreme Court decisions on the applicability of Sections 27/27A to refunds under the notification. The remand must comply with principles of natural justice - hearing the party both orally and in writing - and be completed expeditiously. The Tribunal declines to grant a definitive ruling on interest pending resolution by higher appellate courts.