Customs classification and refund principle: Optical Interface Modules fell under the assessee's claimed tariff heading, with delayed refund carrying interest.

Optical Interface Modules were held classifiable under CTH 85177990 for exemption under Notification No. 57/2017-Customs, because the department's own clarification, technical opinion and later acceptance supported that classification; the Revenue's attempt to classify them under CTH 85176290 failed. Duty paid under protest was therefore refundable, and interest was payable on the delayed refund after expiry of three months from the date of initial payment until actual refund, at 12% per annum. The departmental challenge was rejected, and the refund entitlement with consequential interest was affirmed.

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Issues: (i) Whether Optical Interface Modules were classifiable under CTH 85177990 for the purpose of exemption under Notification No. 57/2017-Customs dated 30.06.2017, or under CTH 85176290 as claimed by Revenue; (ii) whether the respondent was entitled to refund of customs duty paid under protest with interest, and from which date interest was payable.

Issue (i): Whether Optical Interface Modules were classifiable under CTH 85177990 for the purpose of exemption under Notification No. 57/2017-Customs dated 30.06.2017, or under CTH 85176290 as claimed by Revenue.

Analysis: The classification dispute turned on the nature and function of the imported Optical Interface Modules and the departmental clarification already on record. The impugned order had accepted the importer's classification under CTH 85177990 on the basis of the technical opinion of the Department of Telecommunications and the department's own subsequent acceptance of the same classification in earlier correspondence and later assessments. The Revenue's stand under CTH 85176290 was found inconsistent with that accepted position.

Conclusion: The goods were correctly classifiable under CTH 85177990, and the Revenue's challenge to the classification failed.

Issue (ii): Whether the respondent was entitled to refund of customs duty paid under protest with interest, and from which date interest was payable.

Analysis: Since the higher duty had been paid only under protest and the classification adopted by Revenue was not sustained, the excess duty was held refundable. The Tribunal also applied the settled principle that where refund is delayed, interest runs after the stipulated processing period, and relied on the line of decisions recognising 12% per annum as an appropriate rate in such circumstances. The refund could not be withheld merely because an appeal was pending.

Conclusion: The respondent was entitled to refund of the customs duty with interest at 12% per annum, payable after expiry of three months from the date of initial payment until actual refund.

Final Conclusion: The departmental appeal was rejected and the respondent's entitlement to refund with consequential interest was affirmed.

Ratio Decidendi: Where the department's own clarification and subsequent conduct support classification of imported goods in the assessee's favour, the contrary classification adopted for demand and denial of exemption cannot stand, and duty paid under protest becomes refundable with interest for delay beyond the prescribed processing period.

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