The Delhi High Court has imposed the cost of Rs. 1 Lakh on the customs department for non-grant of interest on delayed disbursal of refund.
The bench of Justice Yashwant Varma and Justice Ravinder Dudeja has observed that the successful party finally held entitled to a relief assessable in terms of money at the end of the litigation, is entitled to be compensated by award of interest at a suitable reasonable rate for the period for which the interim order of the court withholding the release of money had remained in operation.
Background
The petitioner/assessee has challenged the action of the respondent department in failing to grant interest on a sum of Rs. 13.16 Crores, which according to it was erroneously recovered during the period of 26 March 2015 to 22 June 2015.
The claim for interest on the delayed disbursal of refund flows in the backdrop of the respondent-department having ultimately refunded the deposited amounts on 29 November 2018.
The 103 Bills of Entries were submitted between 26 March 2015 to 22 June 2015. By this time, the law with respect to an importer being required to make a declaration for availing CENVAT credit had already come to be duly declared and enunciated by the Supreme Court in SRF Ltd., and which judgement had come to be pronounced on 26 March 2015. It appears that realising the mistake committed in making deposits towards CVD at the rate of 12.5% led to the petitioner filing a refund application on 24 June 2016. The application had come to be rejected and which formed the subject matter of challenge in the first writ petition.
However, post the judgement handed down by the Court, the petitioner filed another application requesting the respondents to process its claim for refund. It was acting upon the application that the principal amount was refunded.
The issue raised was whether the respondents are justified in denying the writ petitioner interest in terms as contemplated under Section 27A.
Read More: Customs Duty Exemption Benefit Claim In Bills Of Entry Doesn’t Amount To Mis-Declaration: CESTAT
Relevant Provision – Interest on delayed refunds
As per Section 27-A (2) if any duty ordered to be refunded to an applicant is not refunded within three months from the date of receipt of application interest shall be paid at such rate, not below 5% and not exceeding 30% per annum as is for the time being fixed.
Arguments
The department contended that there was no delay caused by the respondents in attending to the claim for refund since the application made on 23 October 2018 after the judgement rendered by this Court, was disposed of on 14 November 2018 itself and thus within three months of the making of the said application as statutorily stipulated. The interest which is spoken of in Section 27A is liable to be paid on ‘duty’ that may have been deposited. The Court in Telecare I held that the amount claimed was not duty, Section 27A consequently would not apply.
Conclusion
The court held that the stand as taken by the department is not only misconceived, it is also wholly unjust and patently arbitrary. The observation of the amount claimed not being duty is clearly being misinterpreted and construed dehors the context in which it appears. All that the Court intended to convey was that the amount which the petitioner had mistakenly deposited, could never have been recovered or retained by the Customs authorities.
“When Telecare I spoke of the amount not being “duty”, it essentially meant that the amount was not one which could have been legally or legitimately claimed as an impost flowing from the Act. Duty would ordinarily mean a compulsory exaction of money lawfully payable under the Act. However, it would be wholly incorrect to hold that a payment made under a mistaken belief of a liability placed under the Act would fall outside the ken of Section 27A. This is quite apart from us having no hesitation in holding that the stand of the respondents is wholly unjust, inequitable and legally unsustainable,” the court remarked.
The court while allowing the petition stated that the writ petitioner having been compelled to litigate and the stand of the respondent-department being thoroughly unfair and unjust, costs of INR 1 lakh is liable to be imposed on the respondent-department.
Case Title: Telecare Network (India) Pvt. Ltd. Versus Union Of India
Case No.: W.P.(C) 13906/2018 & CM APPL. 11931/2024
Date: 30.08.2024
Counsel For Petitioner: Tarun Gulati
Counsel For Respondent: Anurag Ahluwalia