Illegal retention of customs collections attracts interest even without an express statutory refund provision.

Money collected by customs officers during investigation without authority of law was treated as contrary to Article 265 of the Constitution. The Madras HC applied the settled principle that when the State retains money without legal right, it must restore the amount with interest, even if no express statutory provision for interest exists. Interest was therefore held payable as a consequence of illegal retention, rather than as a claim dependent solely on a refund provision. The assessee was awarded interest from the date of collection until payment at 6% per annum.

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Issues: Whether interest is payable on amounts collected by customs officers during investigation and retained without authority of law, in the absence of an express statutory provision for interest.

Analysis: The collection was found to be without authority of law and therefore offended Article 265 of the Constitution of India. The Court relied on settled principles that when the State receives and retains money without right, it is bound to restore the amount with interest, even if the statute does not expressly provide for interest. The demand for interest was thus treated as a consequence of illegal retention of money and not as a claim dependent solely on a specific refund provision.

Conclusion: Interest was payable to the petitioner from the date of collection till payment, at the rate of 6% per annum, and the claim was allowed in favour of the assessee.

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