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  • Rajesh Audithyan

INTEREST ON DELAYED REFUND OF EXTRA DUTY DEPOSIT – WHAT IS THE ELIGIBILITY CRITERIA ?

As we are aware there is abnormal delay in final assessments of Provisional Bill of entries. Let us discuss who will be eligible for interest on delayed refund amount sanctioned ;

Customs Act, 1962 Provisional assessment of duty SECTION 18 (4)-

“Subject the sub-section (5), if any refundable amount referred to in clause (a) of sub-section (2) is not refunded under that sub-section within three months from the date of assessment of duty finally  [or re-assessment of duty, as the case may be], there shall be paid an interest on such unrefunded amount at such rate fixed by the Central Government under section 27A till the date of refund of such amount”

CASE FAVOURING INTEREST ON DELAYED REFUND OF EXTRA DUTY DEPOSIT :

M/S. DALMIA CEMENT (BHARAT) LIMITED VERSUS THE ASSISTANT COMMISSIONER OF CUSTOMS (REFUNDS) , THE DEPUTY COMMISSIONER OF CUSTOMS (GR. 2), MADRAS HIGH COURT, decided on January 3, 2020


The stand of the Revenue is that there is no time limit for finalisation of the provisional assessments and hence there is no limitation that would apply. This argument is unacceptable in the light of Circular No.11/2001 dated 23.02.2001, wherein at paragraph-9 the Board states as follows:


‘9.The amount of extra duty deposit presently kept at 1% will be continued. Board has however decided that if the importer does not furnish complete reply to the questionnaire within 30 days, of receipt of the ‘Questionnaire’ by the importer, the extra duty deposit will be increased to 5% till the date of receipt of reply by the Department. It should therefore be impressed upon the concerned importers (in the public notice that is issued) to ensure timely replies being sent to the Questionnaire to avoid any higher deposit being insisted.


Furthermore, where provisional assessment is being resorted to, the investigation and finalisation of the assessment must be completed within four months from the date of reply. If no decision is taken within 4 months, the extra duty deposit should be discontinued and the concerned Deputy Commissioner/Assistant Commissioner will be held responsible for inexplicable delay in finalisation.’


Hon’ble Madras High Court observed as follows;


Despite the elapse of nearly 15 years from the dates of the Provisional assessments of the Bills of Entry, no final assessments have been completed till date in the matters.

There is no justification for the Customs Department in this case to have tarried so long and to delay finalisation of assessments as well as consequential refunds to the Dalmia Cement.


The refund will be paid over to the petitioner within a period of four weeks from date of receipt of copy of this order along with interest in terms of Section 27(a) of the Customs Act, computed from three (3) months from 17.12.2007 being date of receipt of the application in respect of one claim and three (3) months from 10.09.2007 in regard to the other claim


Hence Dalmia is awarded with interest on refund amount for almost 13 years !!!

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CASE AGAISNT INTEREST ON DELAYED REFUND OF EXTRA DUTY DEPOSIT:

M/S. GMMCO LIMITED VERSUS COMMISSIONER OF CUSTOMS, CHENNAI, CESTAT CHENNAI, decided on May 31, 2018


The customs Department has sanctioned refund of Extra Duty Deposit and assesse has claimed Interest on delayed Refund. The finalization of assessment was not done within time frame.


There was litigation pending before various forums for entire period till finalization of assessment. The contention of the appellant is that there has been inordinate delay in finalizing the assessment and granting refund which resulted in withholding of legitimate amount causing monetary loss and hardships to the assessee which has to be compensated by way of paying interest on the sanctioned refund.


CESTAT held that on facts, it is brought out that the refund has been sanctioned within three months from the date of finalization of provisional assessment. Section 18(4) provides to pay interest only when the refund is delayed beyond three months after finalization of assessment.


For the entire period till the finalization of assessment, there were litigations pending before various legal forums and after the finalization of assessment, refund has been sanctioned within a period of three months. When the statute does not provide to pay interest, the Tribunal which is a creature of the statute cannot grant any amount in the nature of compensation.


The claim of the assessee for interest on delayed refund is dismissed.


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Conclusion:

1.    1.After final assessment, If amount is not refunded within three months from the date of final assessment then only interest has to be paid by Revenue to assessee.

2.    2.Period of Litigations if any in any legal forum will not be considered for interest purpose. Final assessment order date is the basic criteria.

3.    3.Importers whose Bill of entries are provisionally assessed, has to follow and complete the final assessment at the earliest and from the final assessment date, follow up and get the refund within three months. If refund is not sanctioned within three months, then assessee has to follow up and get interest also.

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