Delayed customs refund interest upheld where excess duty was retained without authority of law after the dispute ended.

Interest on delayed customs refund was held payable where excess duty had been collected and retained during a classification dispute later resolved in favour of the importer. Applying the customs refund framework and Section 27A, the decision treated the refund liability as relating back to the date of collection and accepted that money retained without authority of law may attract reasonable interest. The first appellate order granting interest at 12% per annum was found consistent with settled precedent, and the Revenue's challenge failed.

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Issues: Whether interest at 12% per annum on the refunded customs duty was legally sustainable.

Analysis: The refund arose from excess duty paid on imported goods after the classification dispute was finally decided in favour of the importer. The refund was sanctioned only after the formal refund application, and the refusal to grant interest was examined against Section 27A of the Customs Act, 1962, which governs interest on delayed refund. The decision noted that the duty had been collected and retained during the dispute, and that the liability to refund related back to the date of collection. Reliance was placed on precedents recognising that where money is retained without authority of law, interest may be awarded at a reasonable rate even when the refund is not in the nature of a conventional duty refund alone. The first appellate order awarding 12% interest was found consistent with the settled line of decisions.

Conclusion: The grant of interest at 12% per annum was upheld and the Revenue's challenge failed.

Ratio Decidendi: Where customs duty is retained without authority of law and the refund becomes due only after the dispute is finally resolved, interest on the delayed refund is payable from the relevant date at a rate supported by settled judicial precedent and the statutory refund framework.

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