Interest under Section 27A payable from expiry of three months after refund application; appellate grant does not bar interest.

Where a refund application under the Customs Act was not refunded within three months, Section 27A creates a mandatory entitlement to interest from the day after the three month period; the tribunal held that the computation commences from expiry of three months from each original refund application filed in January-March 2003 and continues until actual refund. The tribunal also held that entitlement to interest cannot be defeated because refunds were ultimately allowed only by appellate orders, and directed recalculation and payment of interest accordingly.

---

---

Issues: (i) Whether interest under Section 27A of the Customs Act, 1962 is payable from the expiry of three months from the date of the original refund applications filed during January-March 2003; (ii) Whether interest can be denied on the ground that refund was granted only pursuant to appellate orders passed subsequently.

Issue (i): Whether interest under Section 27A of the Customs Act, 1962 is payable from the expiry of three months from the date of the original refund applications filed during January-March 2003.

Analysis: Section 27A mandates payment of interest where duty ordered to be refunded is not refunded within three months from receipt of the refund application. The statutory language is mandatory and the provision operates automatically once its conditions are satisfied. Binding precedent interpreting the pari materia provision confirms that the starting point for computation of interest is the expiry of three months from the date of the original refund application and not the date of an appellate order.

Conclusion: Interest under Section 27A is payable from the expiry of three months from the dates of the original refund applications filed during January-March 2003 until the date of actual refund.

Issue (ii): Whether interest can be denied on the ground that refund was granted only pursuant to appellate orders passed subsequently.

Analysis: Denial of interest on the ground that refunds were ultimately allowed only after appellate or reassessment proceedings is inconsistent with the statutory mandate. Procedural delays, reassessments, or departmental errors cannot postpone the operation of Section 27A. Granting interest in respect of some identical cases but denying it in others is contrary to principles of consistency and fairness in tax administration.

Conclusion: Interest cannot be denied merely because the refund was granted pursuant to appellate orders; such denial is legally unsustainable.

Final Conclusion: The Appellant is entitled to interest under Section 27A of the Customs Act, 1962 on the refund amounts sanctioned, computed from the expiry of three months from the respective dates of filing of the original refund applications in 2003 until the date of actual refund; the impugned appellate order is set aside and the adjudicating authority is directed to compute and pay the interest.

Ratio Decidendi: Where a refund application under Section 27 of the Customs Act is not refunded within three months, Section 27A requires payment of interest from the day after the three-month period irrespective of subsequent appellate or reassessment proceedings.

---