Refundable customs deposit earns interest after provisional assessment finalisation, with interest running until actual refund.

A refundable Extra Duty Deposit collected during provisional customs assessment was treated as due for refund once the provisional assessments were finalised and the declared transaction value was accepted. Because the refund applications remained unpaid beyond the statutory period, interest under Section 27A of the Customs Act was held payable. The tribunal also held that the Consumer Welfare Fund objection did not defeat interest once refund was otherwise due. Interest ran from the expiry of three months after finalisation of assessment and continued until actual refund, and the denial of interest was set aside.

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Issues: (i) whether the sanction of refund of Extra Duty Deposit was delayed after finalisation of provisional assessment; (ii) whether interest under Section 27A of the Customs Act, 1962 was payable on the delayed refund; and (iii) for what period such interest was payable.

Issue (i): whether the sanction of refund of Extra Duty Deposit was delayed after finalisation of provisional assessment?

Analysis: The provisional assessments under the related-party import transactions were finalised after the Special Valuation Branch accepted the declared transaction value. The refund applications had been filed long earlier and remained unattended until the later orders sanctioning refund. The amount was not required for adjustment against any differential duty after final assessment, and the refund became due once the provisional assessments were completed and the refundable character of the deposit was determined.

Conclusion: The refund was delayed.

Issue (ii): whether interest under Section 27A of the Customs Act, 1962 was payable on the delayed refund?

Analysis: Extra Duty Deposit was held to be a refundable deposit collected during provisional assessment and not a duty amount standing outside the scope of Section 27A. Once the refund applications were complete and the department failed to release the refundable amount within the statutory period after finalisation of assessment, the liability to pay interest stood attracted. The plea that the amount had to be credited to the Consumer Welfare Fund did not defeat the claim for interest after the refund was found payable to the importer.

Conclusion: Interest under Section 27A was payable.

Issue (iii): for what period such interest under Section 27A of the Customs Act, 1962 was payable?

Analysis: The statutory period ran from the expiry of three months from the date on which the refund became due upon finalisation of the provisional assessments and acceptance of the declared value, and continued till the date of actual refund. The relevant starting point was linked to the final assessment orders and not to the later sanction orders alone.

Conclusion: Interest was payable from the expiry of three months after finalisation of provisional assessment till the date of actual refund.

Final Conclusion: The impugned order was set aside to the extent it denied interest, and the appellants succeeded on the claim for interest on delayed refund of the deposit.

Ratio Decidendi: A refundable deposit collected during provisional customs assessment becomes liable to statutory interest when its refund is not made within three months after the refund accrues upon finalisation of assessment, and the interest runs until actual payment.

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