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2025 (6) TMI 1445 - AT - Customs


The core legal questions considered in this appeal revolve around the entitlement to interest on refund claims arising from provisional assessments under the Customs Act, 1962 (CA 1962). Specifically, the issues are:
  • Whether Sections 18 and 27 of the CA 1962 operate independently or must be read together in the context of refund claims and interest payment.
  • The determination of the relevant date for computation of interest on delayed refund payments-whether it is the date of final assessment order, date of filing refund claim, or date of submission of complete documents.
  • The procedural requirements under Section 27 for filing refund claims, including submission of original importer copies of bills of entry and Chartered Accountant's certificate on unjust enrichment, and their impact on entitlement to interest.
  • Whether a delay in refund payment attributable to the claimant's failure to submit complete documents disentitles the claimant from interest under Section 27A of the CA 1962.
  • The applicability and binding effect of judicial precedents, including decisions of the High Court and Supreme Court, on the interpretation of Sections 18, 27, and 27A of the CA 1962 regarding refund and interest claims.

Issue-wise detailed analysis is as follows:

1. Relationship Between Sections 18 and 27 of the Customs Act, 1962

The appellant contended that Sections 18 and 27 operate independently. Section 18(2)(a) provides for suo moto refund of excess duty paid upon finalization of provisional assessment, and Sections 18(3) and (4) mandate payment of interest on admissible refunds if delayed beyond three months from the date of final assessment order. The appellant argued that reading Section 18 along with Section 27 is untenable and that refunds must be sanctioned automatically without requiring a separate application under Section 27. The appellant relied on judgments supporting automatic refund and interest entitlement upon finalization of assessments.

The respondent-department argued that Section 18 cannot be read in isolation but must be read with Section 27, which prescribes the procedure for claiming refunds, including submission of documentary evidence and applications in prescribed manner. The department emphasized that entitlement to refund under Section 18 does not dispense with the requirement to file a refund claim under Section 27 within the prescribed time and with requisite documents. The department relied on a judgment of the Karnataka High Court which held that refund claims must be supported by complete documentation and that interest is payable only if the refund is not sanctioned within three months from receipt of all relevant documents.

The Court observed that while Section 18 provides the substantive right to refund, Section 27 prescribes the procedural safeguards to ensure proper verification, including prevention of unjust enrichment. The Court noted that the appellant's refund claims were filed under Section 27 after finalization of provisional assessments, and that the department issued deficiency memos and show cause notices due to incomplete documentation.

2. Relevant Date for Computation of Interest on Delayed Refunds

The appellant contended that the relevant date for computing interest under Section 18(4) is the date of final assessment order, and that interest liability arises if refund is not paid within three months from that date. The appellant argued that the department erred in treating the date of submission of refund claim or last document as the relevant date, thereby denying interest.

The department contended that the relevant date for interest computation is the date of receipt of the complete refund claim with all requisite documents under Section 27. The department submitted a detailed time chart showing that refund claims were filed between August and November 2013, deficiency memos and show cause notices were issued, and the final reply was submitted on 24.7.2014. The refund was sanctioned on 30.9.2014, within three months from receipt of the complete documents, thus no delay occurred warranting interest payment.

The Court examined the procedural history and found that the refund claims were incomplete initially, necessitating issuance of deficiency memos and show cause notices. The refund was sanctioned only after the appellant submitted all required documents and replies. The Court relied heavily on the Karnataka High Court judgment in The Commissioner of Customs Mangaluru Vs M/s. JSW Steel Ltd, which was upheld by the Supreme Court, holding that interest is payable only if the refund is not sanctioned within three months from the date of receipt of complete documents. The Court noted that the importer cannot claim interest if delay is attributable to its failure to submit complete documents.

3. Procedural Requirements and Effect of Non-Submission of Documents

The department pointed out that the appellant failed to submit original importer copies of bills of entry and duty paid challans, which are mandatory under Section 27(1A) for refund claims. The appellant submitted indemnity bonds and Chartered Accountant's certificates which were found insufficient to discharge the burden of proof regarding non-passing of duty incidence to other persons (unjust enrichment). The department issued a show cause notice giving the appellant opportunity to justify the claims.

The appellant eventually submitted the required documents and replies, leading to sanction of refund. The Court emphasized that such procedural safeguards cannot be bypassed and that failure to submit complete documents delays the refund process and disentitles the claimant from interest on the refund amount.

4. Effect of Delay Attributable to Claimant on Interest Entitlement

The Court considered the principle that interest under Section 27A is payable only when the department delays refund beyond three months from receipt of complete claim and documents. The Court found that the delay in the present case was due to the appellant's failure to submit complete documents initially. The refund was sanctioned promptly within three months of receipt of the final reply and documents. Therefore, the appellant was not entitled to interest.

The Court rejected the appellant's argument that the department should have paid interest from the date of final assessment order, holding that the procedural requirements under Section 27 must be complied with before refund and interest liability arises.

5. Judicial Precedents and Their Binding Effect

The Court relied on the Karnataka High Court judgment in The Commissioner of Customs Mangaluru Vs M/s. JSW Steel Ltd, which was affirmed by the Supreme Court. The High Court held that the claimant cannot take undue advantage of its own lapses in not submitting complete documents and that the department's sanction of refund within three months of receipt of complete documents negates the claim for interest.

The Court observed that the High Court judgment has binding force and overrides the Tribunal judgments cited by the appellant. Judicial discipline requires adherence to the Supreme Court-approved High Court ruling.

The Court also noted that the appellant relied on judgments which were distinguishable on facts or applicable to different statutory provisions, such as Section 11B of the Central Excise Act, 1944, which is not applicable in the present Customs Act context.

Conclusions on Each Issue:

  • Sections 18 and 27 of the CA 1962 are interrelated; Section 18 confers substantive right to refund, while Section 27 prescribes procedural requirements for claiming refund.
  • The relevant date for computation of interest under Section 18(4) and Section 27A is the date of receipt of complete refund claim and documents, not the date of final assessment order or initial filing of incomplete claims.
  • Failure to submit mandatory documents delays refund sanction and disentitles the claimant from interest on the refund amount.
  • Refund sanctioned within three months from receipt of complete documents does not attract interest liability under Section 27A.
  • Judgments of the High Court, affirmed by the Supreme Court, holding the above principles are binding and override contrary Tribunal decisions.

Significant holdings and core principles established include:

"The respondent-importer cannot be permitted to take undue advantage of lapses on his part in not submitting complete document to enable the Revenue to finalize the assessment before ordering for refund."

"Interest under Section 27A of the Customs Act, 1962 is payable only if the refund is not sanctioned within three months from the date of receipt of complete refund claim and documents."

"Sections 18 and 27 of the Customs Act, 1962 must be read together; Section 18 confers the substantive right to refund, while Section 27 prescribes the procedural safeguards including timely filing and documentary evidence."

"The relevant date for computation of interest is the date of receipt of the complete refund claim, not the date of final assessment order or initial filing of incomplete claims."

"Judicial discipline requires adherence to the binding decisions of the High Court and Supreme Court which have overruled the contrary views of the Tribunal."

Accordingly, the Court upheld the impugned order rejecting the claim for interest on delayed refund payment and dismissed the appeal.

 

 

 

 

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