Siddharth Intercontinental ... vs Collector Of Customs And Anr.
2003 Latest Caselaw 787 Del

JUDGMENT

Badar Durrez Ahmed, J.

1. The only question in this petition is with regard to the petitioner's entitlement to interest in respect of customs duty refunded to it in 1994.

2. The petitioner imported kitchen equipment. It so happened that the imported goods were lost while in the possession of the customs authorities. Later on, after about four months, the goods were traced out but were found to be in a damaged condition. As such, the petitioner paid duty under under protest. Thereafter, the petitioner moved a refund claim for refund of proportionate duty in respect of the damaged goods. Initially the Asstt. Collector passed an order in original whereby the refund claim was found to be time barred. The Collector Appeals, in appeal preferred against the order in original, upheld the order of the Asstt. Collector. However, the Customs, Excise and Gold (Control) Appellate Tribunal, New Delhi by a judgment and/or order dated 08.04.1992 allowed the appeal of the petitioner and set aside the impugned order with consequential relief.

3. As the petitioner was still not refunded the amount, it moved an application before the Tribunal praying for the consequential relief that was granted to it by the earlier order dated 08.04.1992. By an order dated 19.11.1993, the Tribunal observed that in normal course, the departmental authority is required to comply with the order of the Tribunal promptly and, therefore, by that time the appropriate action as required in terms of the earlier order ought to have been taken. However, in view of the submissions of the departmental representative, the Tribunal allowed the department one month's time within which it was to comply with the orders in accordance with law and to report the same. Thereafter, the matter came up on 24.12.1993 by which time the refund of an amount of Rs 75, 151.77 had been made to the petitioner by a pay order. In these circumstances, the Tribunal recorded that the learned representative of the company, having received the pay order, no further order was called for and the matter was closed. The petitioner is aggrieved by this last order in as much as the petitioner had been granted consequential relief which, according to him, included both refund and interest thereon and which, according to learned for the petitioner, was the norm in such matters based upon the well-settled principles that where a party retained amount/money illegally or wrongfully, it was liable to pay interest therefore.

4. The learned counsel for the petitioner has placed reliance on three decisions of various High Courts in support of this plea. He firstly relied upon the decision in the case of Calcutta paper Mills Manufacturing Co. v. Customs, Excise and Gold (Control) & ORs. , reported in 1986 (25) ELT 939 (Calcutta). In that case in paragraph 17, it was observed as under:-

"It is not disputed that the petitioner was not liable to pay any duty on the product processed by it. Thus, the collection made by the respondents is unauthorised. Interest is the return or compensation for the use or retention of another's money. The respondents have retained and enjoyed the benefit of such money so long. Accordingly, the petitioner is entitled to interest. Two decisions of Gujarat High Court support the view I have taken in Vijay Textile, A Partnership Firm at plot No. 4, Nerol Abendaly v. Union of India reported in 1979 ELT 181 the Gujarat High Court held that if the Excise Authorities have collected any amount as tax without authority of law, it is just and proper that they should pay interest at the rate of 12% per annum from the date of collection of the said amount till the date of actual repayment. Similar view was taken by the same High Court in the case of Jyoti limited, Baroda v. Union of India and Another reported in 1979 ELT 546."

Thereafter, the learned counsel for the petitioner relied upon the decision in the case of Messrs Metal Distributors Ltd, Bombay & Anr v. Union of India & Ors, reported in 1988 (14) ECR 383 (Bombay). This decision was rendered by a Division Bench of the High Court at Bombay wherein it was held that once a refund is to be granted then the amount should be paid Along with interest. The Division Bench observed in paragraph 7 of the said judgment as under:-

"The learned Judge held that the importer is entitled to the refund of this amount of duty but did not grant interest on this amount without assigning any reason. In our judgment, once it is found that the principle amount was due to the importer, then the amount should have been paid by the respondents along with interest. In our judgment, the importer is entitled to this relief and the order of the learned single Judge is required to be modified to that extend by partly allowing the appeal preferred by the importer."

Lastly, the learned counsel for the petitioner relied upon the decision in the case of Hope Textiles Ltd v. Union of India, reported in 2000 (119) ELT 279 (MP). This is a decision given by a learned single Judge of the High Court of Madhya Pradesh wherein it has been observed that the power of the High Court to award interest, on equitable ground, in exercise of writ jurisdiction, is well recognised. In this decision, it was also observed that it is a well-settled and existing principle of equity that when a party has suffered any loss on account of wrongful withholding of any amount due to him by the other party, the latter who has drawn undue advantage by withholding the said amount should compensate the former. On these principles, the Court allowed the petitioner interest @ 12% per annum on the principle amount refunded.

5. It is to be noted that the Customs Act, 1962 has been amended and w.e.f. 26.05.1995, inter alia, section 27A was inserted which specifically provided for interest on delayed refunds. It is clear that even prior to the introduction of this section, various High Courts had been allowing interest on delayed refunds upon equitable principles. Although section 27A cannot be regarded to have retrospective effect particularly in view of the proviso contained therein, at the same time, it cannot be denied that the provisions of this section were in fact a recognition of the equitable principles which were already in operation by virtue of several decisions of High Courts as observed above. Thus, although section 27A does not have retrospective operation as such and the petitioner is not claiming interest on delayed refunds, under the provisions of section 27A in as much as the refund in the present case was made much prior to the introduction of the said section, on the well-settled equitable principles, the petitioner is entitled to interest on the amount refunded for the period of delay in refunding the amount. In the order of the Tribunal dated 08.04.1992, it has been found and observed that the petitioner had made a refund claim by letters dated 22.11.1984 and 30.04.1985. The earliest refund application would be the one made vide letter dated 22.11.1984. Hence, interest would start running from the date of this application, i.e., from 22.11.1984. Accordingly, it is ordered that the petitioner be paid interest on the sum refunded, i.e., Rs75, 151.77 @ 12% per annum with yearly rests from 22.11.1984 till December, 1993. In addition to the aforesaid amount, the petitioner is also entitled to interest pendente lite @ 6% and future interest till the payment of the aforesaid amount is made to the petitioner and it is directed that the respondents make the payment to the petitioner within one month from today.

5. The writ petition is accordingly allowed and disposed of.