Legal principle

Where duty that was never payable is refunded after prolonged departmental delay in re-assessment and refund, interest at the statutory rate is payable from the date of the importer's first re-assessment application to the date of actual refund, since the importer cannot be made to suffer for the Department's delay.

Court decision

The Court held in favour of the petitioners: in the four writ petitions (W.P.(C) 1225/2024, 1291/2024, 1297/2024 and 1325/2024) they are 'clearly entitled to interest' since the refund orders were passed beyond the stipulated period of 3 months from filing of the refund applications and the delay in re-assessment was the Department's. Interest is to be computed at the rates prescribed in the statute from the date of the first re-assessment application to the date of actual refund for all the BoEs, and the impugned orders were modified to direct the Deputy Commissioner (Refund) to compute and grant such interest within three months; the petitions were disposed of accordingly.

Facts

Lava International Ltd. and four electronics importers (Jaina Marketing, Jaina Mobile India, Intex Technologies and U T Electronics) imported mobile phones, tablets and similar goods and paid additional customs duty/CVD at 12.5% under protest because the ICEGATE portal did not permit claiming the concessional rate under exemption notifications (Notification No. 12/2015-C.E. and Notification No. 12/2012-CE, S.No. 263A(ii)). They sought re-assessment/amendment of their Bills of Entry, and after long delay the adjudicating authority amended the BoEs under Section 149 read with Section 154 and re-assessed under Section 17(4) read with 17(5) of the Customs Act, 1962, extending the concessional rate. The Department's appeals against the re-assessment orders were decided on 6th April 2023 in the importers' favour and were accepted on 6th July 2023. The Commissioner (Refund) sanctioned refunds after examining unjust enrichment under Section 28D (following Mafatlal Industries), but refused interest, prompting these Article 226 petitions.

Key provisions

• Section 27, Customs Act, 1962 — Claim of refund duty
• Section 3(1), Customs Tariff Act, 1975 — Levy of additional duty equal to excise duty, sales tax, local taxes and other charges
• Section 128, Customs Act, 1962 — Appeal to Commissioner (Appeals)
• Section 27A, Customs Act, 1962 — Interest of delay refunds
• Section 12, Customs Act, 1962 — Dutiable goods
• Section 149, Customs Act, 1962 — Amendment of documents
• Section 17(4), Customs Act, 1962 — Assessment of duty
• Section 2, Customs Tariff Act, 1975 — Duties specified in the Schedules to be levied
• Section 28D, Customs Act, 1962 — Presumption that incidence of duty has been passed on to the buyer
• Section 154, Customs Act, 1962 — Correction of clerical errors etc