TMI Blog2011 (4) TMI 142X X X X Extracts X X X X X X X X Extracts X X X X ..... mount' as appearing in Sections 240 and 244(1A) of the Income Tax Act and in the absence of any specific provision on grant of interest on the belated refund of the interest component, it applied the general principles - Decided against the assessee - CMA.No. 3873 of 2005 - - - Dated:- 9-4-2011 - Mrs.Justice CHITRA VENKATARAMAN, Mr.Justice P.P.S.JANARATHANA RAJA, JJ. For Appellant : Ms.Mallika Srinivasan For Respondents: Mr.C.Natarajan, Senior Counsel for Mr.N.Inbarajan JUDGMENT CHITRA VENKATARAMAN, J. The Revenue has come on appeal by raising the following substantial questions of law:- "1. Whether the Appellate Tribunal is correct in ordering for payment of interest on interest when there is no provision for payment of interest on interest under the provisions of the Customs Act or its Rules framed their under. 2. Whether the Appellate Tribunal is correct in pleading reliance upon the decision of the Supreme Court in Commissioner of Income Tax -Vs- Narendra Doshi reported in 254 ITR 606 when the facts of the case and provisions of the Income Tax Act is not applicable to the facts of this case and the provisions of the Customs Act." 2. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... out that even though the assessee had not passed on its liability to the customers, yet, having regard to the order passed dated 28.8.2002 of the Commissioner (Customs), a sum of Rs.3,59,62,163/- was remaining outstanding towards differential duty together with interest. Thus, in terms of Section 142 of the Customs Act, a sum of Rs.2,01,89,241/- refundable to the assessee/respondent herein, was to be deducted as against a sum of Rs.3,59,62,163/-. Thus the Deputy Commissioner sanctioned the sum of Rs.2,01,89,241/- alone by way of refund under Section 27 of the Customs Act. On appeal by the respondent/assessee before the Commissioner of Customs, by order dated 31.03.2004, the Commissioner modified the order of the Deputy Commissioner and held that the assessee paid the differential duty and interest on the differential duty on account of non-fulfilment of export obligation. However, the Commissioner of Customs ordered confiscation of goods. Consequent on the DRI booking a case for evasion of duty against the assessee, the Commissioner of Customs demanded extra duty, which was subsequently set aside by the CEGAT. The Commissioner held that the Deputy Commissioner of Customs (Refunds) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hree months from the date of receipt of application under sub-section (1) of that section, they shall be paid to that applicant interest at such rate, not below five per cent and not exceeding thirty percent per annum as is for the time being fixed by the Central Government, by notification in the Official Gazette, on such duty from the date immediately after the expiry of three months from the date of receipt of such application till the date of refund of such duty. " 6. Learned Standing Counsel appearing for the Revenue placing reliance on Section 27A of the Customs Act submits that the Tribunal committed a serious error in law in just adverting to the provisions of Section 27A of the Customs Act. As Section 27A of the Customs Act has a restricted operation to grant interest only on the duty element, it cannot be taken to cover the payment of interest on the interest paid on the belated payment. 7. Per contra, learned Senior Counsel appearing for the respondent/ assessee submitted that going by the decision of the Apex Court reported in 254 ITR 606 (COMMISSIONER OF INCOME TAX -Vs- NARENDRA DOSHI), when interest payment is compensatory in character, it takes the character ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... claim of refund of duty and interest on belated refund. A reading of Section 27(2) of the Act, as it originally stood, had referred to refund of duty alone for the purposes of considering the refund claim. However, by reason of amendment brought forth under Act 55 of 1991, with effect from 23.12.1991, the interest component on the belated payment of duty was also made the subject matter of refund, provided under sub-section (2) of Section 27 of the Customs Act. Thus, on and from 23.12.1991, on an application made by the assessee for refund of duty paid as well as for interest thereon, on satisfaction of the conditions on refund, the Assistant commissioner of Customs or Deputy Commissioner of Customs, as the case may be, has to pass an order of refund of duty as well as interest on belated payment. 12. Section 27A of the Customs Act was inserted by Act 22 of 1995, with effect from 26.5.1995. The amendment contemplates payment of interest, depending on the period of delay in ordering refund. 13. A reading of the said Section shows that if any duty ordered to be refunded under sub section (2) of Section 27 of the Customs Act is not refunded within a period of three months fro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Legislature knows the law prevailing at the time when the amendment was brought forth and that the Legislature has chosen to restrict the grant of interest on delayed refunds alone, it is difficult to stretch the language in Section 27A to accept the plea of the assessee that it is entitled to interest on the interest too on the score that Section 27(2) contemplated refund of duty and interest. The provision, as it stands under Section 27A of the Act, has to be read as restricted to claim on duty alone and it cannot be extended to include interest within its fold for the purpose further grant of interest under Section 27A of the Act. 15. It is also relevant to note that a reference to duty and interest in Section 27(2) of the Customs Act was added by way of substitution under Act 55/1991 with effect from 23.12.1991. As already pointed out, Section 27A of the Customs Act, granting interest on delayed refund, was inserted by Act 22/1995 with effect from 26.5.1995. In this connection the decisions relied on by the learned Senior Counsel for the assessee have to be seen. 16. In the decision reported in [2006] 280 ITR 643 - SANDVIK ASIA LTD. v. CIT, filed as against the judgmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e principle that a person should only be taxed in accordance with law and hence, where excess amount of tax are collected from an assessee or any amounts are wrongfully withheld from an assessee without authority of law, in spite of a decision of the Court in favour of the assessee, the Revenue must compensate the assessee. Section 240 of the Income Tax Act deals with refund on appeal. The expression used therein is "refund of any amount". The Supreme Court held that the said phrase has to be interpreted in the same manner as under Section 244(1A) of the Income Tax Act, that the expression referred not only to tax, but also to interest. 19. The Supreme Court referred to the decisions in the case of CIT v. GOODYEAR INDIA LIMITED - [2001] 249 ITR 527, D.J.WORKS v. DEPUTY CIT - [1992] 195 ITR 227, CIT v. NEEDLE INDUSTRIES PRIVATE LIMITED - [1998] 233 ITR 370 and CIT v. AMBAT ECHUKUTTY MENON - [1988] 173 ITR 581 and rejected the view of the Bombay High Court. The Apex Court held that the assessee was entitled to interest as per the provisions of Sections 244 and 214 of the Income Tax Act. On the interest payable on the belated refund of interest paid by the assessee, in paragraphs ..... X X X X Extracts X X X X X X X X Extracts X X X X
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