2025 (10) TMI 333 - AT - Customs

Department appeal dismissed; refund interest under s.27A payable from three months after filing refund application

CESTAT CHENNAI - AT dismissed the Department's appeal and rejected the Revenue's plea to keep the appeal pending due to higher court proceedings. The ... Interest u/s 27A of the Customs Act, 1962 on refund of the additional duty of customs under Section 3 (5) of the Customs Tariff Act 1975 - rejection of claim for interest on the grounds that the scheme of refund of 4% AD has been notified through the exemption notification no. 102/2007-Cus. Dated 14.09.2007 and hence the conditions as prescribed in the said notification as amended will apply - HELD THAT:- The plea taken by the Revenue that since the Department has preferred a Writ Appeal against the order of the Jurisdictional High Court, the matter has not attained finality, is addressed. This Tribunal had recently an occasion to consider a similar plea, wherein the matter was requested to be kept in abeyance pending the decision of an appeal preferred in the case of another assessee which was admitted and pending decision in the Apex Court. This Tribunal in the case of Twenty First Century Pharmaceuticals P. Ltd v. Commissioner of Customs, Chennai [2025 (9) TMI 1348 - CESTAT CHENNAI] has held that 'as per the law laid down by Constitutional Courts it is not open for us to refuse to follow a judgment or refuse to take up an appeal for decision by stating that it has been put in jeopardy due to an appeal before a higher forum. To keep an appeal pending just because a superior appellate court is seized of the matter would paralyse the entire appellate machinery and would not be in public interest.' Therefore, no doubt the matter may not have attained finality, but that did not shackle the Ld. Appellate Authority, from proceeding to decide the matter based on the ratio laid down therein, in the absence of any stay. The said plea of the Revenue is thus noted, only to be rejected. On merits, it is found that the issue need not detain here any further and as rightly stated by the Ld. Counsel for the Respondent, the lis inter-se the Respondent and Revenue on this matter, stands settled vide the decision in the Respondent’s own case reported as M/s. HLG Trading, through its proprietor Gagan Goyal Vs. The Principal Commissioner of Customs, The Deputy Commissioner of Customs (Refunds-II), Chennai, [2025 (6) TMI 1608 - MADRAS HIGH COURT] where it was held that 'the Petitioners are entitled to interest under Section 27A of the Customs Act, 1962 from the date of the expiry of three months from the date of filing of the refund application.' Revenue has not shown that the aforesaid order of the Honourable High Court in the respondent’s own case has been stayed. In adherence to judicial discipline and respectfully following the same, it is held that the Department Appeal is untenable and is liable to be set aside. Appeal dismissed. ISSUES PRESENTED AND CONSIDERED 1. Whether interest under Section 27A of the Customs Act, 1962 is payable on refunds granted pursuant to an exemption notification that operates by way of refund (Notification No. 102/2007-Cus.). 2. Whether refunds arising under the exemption notification are governed exclusively by the terms of that notification and Circular No.6/2008-Customs (dated 28.04.2008), thereby excluding the operation of Sections 27 and 27A of the Customs Act. 3. Whether the appellate authority/tribunal may decide the appeal notwithstanding a pending appeal by the Department against a High Court judgment on the same legal question (i.e., the effect of a higher forum hearing on the duty to follow a precedent in absence of a stay). 4. Whether a binding High Court decision in the appellant/respondent's own case (or closely analogous cases) requires the department to grant interest on delayed refunds in the absence of a stay of that High Court order. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Applicability of Section 27A interest to refunds under the exemption notification Legal framework: Section 27 governs refunds under the Customs Act and Section 27A prescribes interest payable on delayed refunds under Section 27. Notification No.102/2007-Cus. grants exemption from Special Additional Duty (SAD) by way of refund subject to conditions. Circular No.6/2008 prescribes procedural steps for settlement of refund claims under that notification. Precedent treatment: The adjudicating authority treated the notification as an independent scheme and held Sections 27/27A not applicable. The Appellate Authority and the Tribunal followed a High Court decision holding that interest under Section 27A is payable on such refunds. Interpretation and reasoning: The Tribunal accepted the High Court's interpretation that refunds under Notification No.102/2007, although effected by an exemption mechanism, do not fall outside the statutory remedy of Section 27A where delay has occurred. The Court reasoned that acceptance of refund liability by the Department in similar matters and judicial pronouncements compel payment of interest from the statutory trigger date (expiry of three months from filing of refund application). Ratio vs. Obiter: Ratio - Where an exemption notification results in a refund of duty paid, the claimant is entitled to interest under Section 27A from the date stipulated by the statute (expiry of three months from filing the refund application) if the refund is delayed; an exemption notification does not by itself oust the operation of Sections 27/27A in respect of delayed refunds. Obiter - Procedural expectations under the Circular insofar as administrative expeditiousness are factual observations supporting the conclusion. Conclusion: Interest under Section 27A is payable on refunds effected under Notification No.102/2007 unless a competent court has stayed the relevant High Court order; hence the respondent is entitled to interest to be calculated from the statutory date. Issue 2 - Whether the exemption notification and Circular exclude Sections 27/27A Legal framework: Exemption notifications grant relief subject to their terms; administrative circulars direct implementation procedure but cannot override statutory provisions. Precedent treatment: The adjudicating authority adhered to a literal administrative view that the notification/Circular displace Sections 27/27A for these refunds. Higher adjudicative/ judicial authorities rejected that displacement in favour of statutory entitlement to interest. Interpretation and reasoning: The Tribunal held that while the notification delineates the substantive right to refund and the Circular prescribes administrative procedure, neither can negate express statutory provisions granting interest on delayed refunds under Section 27A. The Court emphasized that an exemption 'operat[ing] by way of refund' does not immunize the Department from statutory consequences of delay. Ratio vs. Obiter: Ratio - Administrative circulars and the modality of an exemption notification cannot oust statutory remedies for delayed refunds; the statutory provision for interest prevails where applicable. Obiter - Discussion on administrative practice and expeditious settlement procedures. Conclusion: The notification and Circular do not operate to exclude Sections 27 and 27A where interest is claimable for delayed refunds; claimants are entitled to interest subject to statutory conditions. Issue 3 - Authority to decide appeals notwithstanding pending higher appeals Legal framework: Judicial hierarchy permits tribunals and courts to follow existing binding precedent; pendency of a challenge in a higher forum does not automatically bar lower forums from deciding matters in accordance with existing law absent a stay. Precedent treatment: The Tribunal referenced its own prior order and constitutional court law indicating that refusing to decide due to a pending higher appeal would paralyse the appellate machinery. Interpretation and reasoning: The Tribunal rejected the Department's contention that matters should be kept in abeyance until final adjudication in another appeal, holding that absence of a stay renders the binding lower-court/tribunal ratio operative and decision on individual appeals is permissible and required. The Court observed that non-finality does not prevent reliance on an extant judgment unless a stay has been obtained. Ratio vs. Obiter: Ratio - In absence of a stay, tribunals are entitled and obliged to decide appeals by following existing judicial precedents even if higher courts have appeals pending; pendency alone does not freeze enforcement of settled ratios. Obiter - Administrative convenience considerations. Conclusion: The appellate authority and Tribunal were correct in proceeding to decide the appeal despite pendency of departmental appeals at higher fora, in absence of any stay. Issue 4 - Binding effect of the High Court decision in the respondent's own case and entitlement to consequential reliefs Legal framework: Decisions of the High Court are binding on subordinate authorities within its jurisdiction and confer enforceable rights unless stayed or reversed. Precedent treatment: The Tribunal expressly followed the relevant High Court order which directed refund of SAD and grant of interest under Section 27A and noted that the Department had not shown any stay of that order. Interpretation and reasoning: Given the direct applicability of the High Court's order to the facts before the Tribunal and absence of any stay, the Tribunal applied judicial discipline to follow that decision. The Tribunal observed prior instances where the Department had accepted similar decisions and effectuated refunds accordingly, reinforcing consistency and predictability. Ratio vs. Obiter: Ratio - A binding High Court order directing refund and interest must be followed by subordinate authorities in the absence of a stay; where such an order applies to an assessee, consequential reliefs including interest are payable and must be processed forthwith. Obiter - Observations on departmental acceptance in other matters. Conclusion: The Tribunal set aside the departmental appeal, directed grant of interest as per Section 27A from the statutory date, and affirmed entitlement to consequential reliefs in law, since the High Court decision in the same matter was binding and not stayed.