Legal principle

A refund-sanctioning order that grants the principal refund but is silent and gives no reasons on the claim for accrued interest is passed without application of mind and is unsustainable, entitling the claimant to a fresh adjudication of the interest claim by a speaking order after personal hearing.

Court decision

The court did not itself decide the entitlement to interest; it held that the impugned order dated 30 June 2023, being completely silent on the interest claim and containing no findings or reasons for its non-grant, was passed without due application of mind. It directed the petitioners to file a fresh application for accrued interest within two weeks, and Respondent No. 1 to grant a personal hearing within two weeks and decide the application afresh in accordance with law, preferably within three months, with all contentions kept open. The petition was disposed of in these terms, with no costs, effectively in favour of the petitioners on the procedural point.

Facts

Petitioner No. 1, a 95-year-old trading house exporting rice, oil seeds, food grains and pulses and importing green peas, yellow peas and corn, was denied customs duty benefits under Notification No. 21/2002-Customs dated 1 March 2002 on imports of pop corn (maize) for violation of actual user conditions. By order dated 31 January 2017, duty with education cess of Rs. 3,05,70,953 plus interest was confirmed under Section 28(4) read with 28AB/AA of the Customs Act, deposits of Rs. 2,96,80,356 were appropriated, an equal penalty under Section 114A was imposed on Petitioner No. 1 and Rs. 30,00,000 on its director. CESTAT, by common order dated 25 January 2023, set aside that order and allowed the appeals. On the petitioners' refund application dated 21 April 2023, the Assistant Commissioner by order dated 30 June 2023 sanctioned refund of Rs. 4,26,98,256 and Rs. 3,00,000 respectively, but refused to grant the accrued interest of 9% per annum claimed from the date of deposit, prompting this writ petition under Article 226.

Key provisions

• Section 27A, Customs Act, 1962 — Interest of delay refunds
• Section 27, Customs Act, 1962 — Claim of refund duty
• Section 28AB, Customs Act, 1962 — [Omitted] ****
• Section 28(4), Customs Act, 1962 — Recovery of duties not levied or not paid or short-levied or short- paid or erroneously refunded