Commissioner Of Customs vs M/S. Vedanta Ltd
2025 Latest Caselaw 392 Ori

Orissa High Court

Commissioner Of Customs vs M/S. Vedanta Ltd on 9 May, 2025

Author: Murahari Sri Raman

Bench: Murahari Sri Raman

                     IN THE HIGH COURT OF ORISSA AT CUTTACK
                                     OTAPL No.29 of 2025
                 Commissioner of Customs               ....            Appellant
                 (Preventive), C.R. Building,
                 Rajaswa Vihar, Bhubaneswar,
                 Dist-Khurda-751007, Odisha
                                    Mr. Tushar Kanti Satapathy, Senior Standing
                                           Counsel for Central Tax and Customs

                                            -versus-
                 M/s. Vedanta Ltd.                  ....           Respondent
                                       Mr. Mukesh Panda, Advocate along with
                                                  Mr. Parth Parikh, Advocate

                                   CORAM:
                       THE HON'BLE THE CHIEF JUSTICE
                                     AND
                 THE HON'BLE MR. JUSTICE MURAHARI SRI RAMAN

                                          ORDER

Order No. 09.05.2025

02. This matter is taken up through Hybrid mode.

2. The Department has come up in appeal against the order of the Customs, Excise and Service Tax Appellate Tribunal constituted under the Customs Act, 1962, whereby and whereunder the direction was passed upon the Department to pay the interest on the excess amount of custom duty retained by the Department for a considerable period of time and even the adjudication to an application claiming refund was done after unexplained inordinate delay.

3. The undisputed facts emerged from the record are that at the time of an import of goods, the duty was cast upon the Customs Authorities under Section 18 of the Act to direct the parties to pay

any duty leviable on the said goods pending the production of such documents or furnishing of such information or completion of such test or enquiry as a provisional assessment and upon furnishing of all such documents, the Authority may assess the duty finally.

4. Undisputedly, on the basis of a provisional assessment of the duty, the respondent made the payments and the goods were cleared, but after collation and collection of various materials, the dispute was raised that the amount of duty leviable or a category of the goods so imported is erroneous and it should be classified under a particular category which attracts lesser amount of duty. Undeniably, the authority accepted the aforesaid contention that the excess amount of duty is paid by the respondent and right to get a refund gets crystalized. Despite the same, there appears to be an unexplained inordinate delay of nearly 14 years in arriving at such conclusion. Accepting the contention of the respondent, it is also not in dispute that the excess amount was refunded from the date of the order. Subsequently, the representation was made for payment of the interest as the excess amount was unreasonably withheld and the adjudication spanned over a decade and half and, therefore, the interest on such excess amount is required to be paid. The authority took a decision thereupon and ultimately the matter reached the Appellate Authority Customs, Excise and Service Tax and to the Appellate Tribunal granting the interest at the rate of 12% from the date of the first assessment order.

5. Mr. Tushar Kanti Satapathy, learned Senior Standing Counsel appearing for the Appellant submits that the Tribunal is denuded of the power to grant compensatory interest and, therefore, the order

suffers from illegality and/or infirmity. He further submits that the Tribunal cannot exceed its power and the jurisdiction vested under Section 129B of the said Act, more particularly, when Section 27A of the said Act postulates the payment of interest from the date of an application made by any person claiming refund or from a date of an order passed by the statutory Appellate Authority of the Tribunal. It is submitted that the period for payment of the amount of refund is provided in the said provision and it is undeniable that the said amount was paid within the said statutory period. According to him, once the amount is paid within the statutory period provided therefor, it does not attract the imposition of any interest and, therefore, the instant appeal raises a substantial question of law to be determined by this Court.

6. Without delving into the nuances of the provisions contained in Section 130 of the said Act, we invited the attention of both the counsels to address us on the above score and in course of the hearing, our attention is drawn to the Notification No.75/2003- Customs (N.T.), dated 12th September, 2003 issued by the Under Secretary to the Government of India in the Ministry of Finance (Department of Revenue) fixing the interest at the rate of 6% per annum for the purpose of Section 27A of the said Act.

7. The pith and substance of the case leaves no ambiguity that the excess amount of the duty was paid by the respondent and an adjudication spanned over more than one decade, i.e., the fourteen years and the said amount was retained with the Department. We have been given to understand that Chapter-VII of CBIC Manual of Instructions issued by the CBIC in exercise of power under Section

151A of the Customs Act, 1962, dealing with "Provisional Assessment", specified finalization of the provisional assessment indicating the time limit within which it should be ensured in the following:-

"3. Finalisation of Provisional Assessment:

3.1. The provisional assessments are expected to be finalized expeditiously, well within 6 months. However, in respect of cases involving machinery contracts or large project imports, where imports take place over long period, such finalization may take more time since action to can be taken only after all the imports have been made. Here too, effort should be made to finalise the cases within 6 months of the date of import of the last consignment covered by the contract.

[Refer Instructions F. No.512/5/72-Cus.VI, dated 23-4-1973; and F. No.511/7/77-Cus.VI, dated 9-1-1978 and Circular No.17/2011-Cus., dated 8-4-2011]"

8. In an identical situation, a Division Bench of the Jharkhand High Court in the case of M/s. Bihar Foundry & Castings Ltd., vs. Union of India (W.P.(T) No.5161 of 2022 with W.P.(T) No.4340 of 2022 disposed of on 04.03.2024) reported at 2024 (3) TMI 371 considered the claim of an interest awarded by the Tribunal that there has been a considerable delay in adjudicating and/or determining the duty. In the said report, there was a delay of ten years in taking a decision and the amount was paid by the Department taking advantage of the statutory provisions, particularly the period within which the same has to be paid. The Division Bench taking note of the said instructions/circulars, as quoted hereinabove, held that the said period given in the said circular should not be construed simpliciter and instructions are to

be kept in a file and non-adherence does not invite any consequences. The Division Bench was of the view that the limitation for finalization should be governed by paragraph-3.1 of the CBIC instructions and if any departure is seen therefrom, there is no fetter on the part of the Tribunal to impose the interest in the following:-

"21.It is not out of place here to mention that Rule 5 of Customs (Finalization of Provisional Assessment) Regulation, 2018 (the 2018 Regulation) applies only to provisional assessment made after 14-08-2018; hence, in the case at hand it cannot be applied on the provisional assessments of the 4 Bill of Entries as they are made in the year 2012. The limitation for finalization to the case at hand would be governed by Para 3.1. of the CBIC Instruction as per which the finalization of provisional assessment is to be made expeditiously, well within 6 months whereas in the instant case the finalization is done after 6 years to 9 years. The Punjab & Haryana High Court in the case of Golden Enterprises Vs. CC reported in 2022 (379) E.L.T 334 (P&H) under the Customs Act, 1962 while dealing with similar circumstances following its earlier judgment in the case of Gupta Smelters Pvt. Ltd Vs UOI reported in 2019 (365) ELT 77, M/s. GPI Textiles Vs. UOI reported in 2018 (362) ELT 388 (P&H) and judgment of the Gujarat High Court in the case of M/s. Siddhi Vinayak Syntex Pvt. Ltd. Vs. UOI reported in 2017 (352) ELT 455 (Guj) wherein the finalization of provisional assessment after 8-9 years from the date of Bill of Entry was quashed considering that there was no petition by the Petitioner pending before Competent Court nor was any stay of any court, thus, there was no reason to withhold framing of final assessment."

9. Admittedly, the order of the Appellate Authority was assailed before the Tribunal and it admits of no ambiguity that the moment the Tribunal exercises the jurisdiction, it can take note of the mandates of law and may award the compensatory interest. It is inconceivable that the authority sat over the issue for considerable period of time despite paragraph-3.1 of the CBIC instructions and unreasonably taking advantage of the nuances of the law that the provision mandates the payment within three months from the date of the order despite such order is passed after fourteen years from the date of an approach having made in this regard. The Court cannot remain a mute spectator and may extend the substantial justice after balancing the technical objections. If the substantial justice is pitted against the technical objections or of such nature, the former must prevail. We do not find any fetter on the imposition of any interest for the delayed payment under Section 27A of the said Act nor we find any fetter on the part of the Tribunal, before whom the order of the appellate authority is assailed, to pass such order. The hierarchical system of the adjudication provided in the statute does not create any brindle into the exercise of the power so conferred and the higher forum is not denuded of power to take a decision, whether the decision of the authority below can withstand on the parameters of the law. We do not find any obstacle in activating the provisions of the statute conferring power upon the authorities to impose interest and the moment the authorities have exercised such power, it does not raise any question of law. Even a Division Bench of the Jharkhand High Court has interpreted that the delayed disposal of the matter despite the mandate given in the said

manual of instruction having a statutory flavour cannot be subverted taking aid of the technical rules, which we find, cannot stand on the way of the Tribunal in deciding the same.

10. However, we appreciate the contention of the appellant on the Notification dated 12th September, 2003, where for the purpose of Section 27A of the Customs Act, the Central Government has fixed the rate of an interest at the rate of 6% per annum. We, therefore, find force on the submission of the appellant in this regard. The order of the Tribunal is modified to the extent that instead of an interest at the rate of 12% per annum, the same shall be paid at the rate of 6% per annum from the date stated therein.

11. With the aforesaid observation, the Tax Appeal stands disposed of.

(Harish Tandon) Chief Justice

(M.S. Raman) Judge Aswini/laxmikanta

Signature Not Verified Digitally Signed Signed by: ASWINI KUMAR SETHY Designation: Personal Assistant (Secretary-in-Charge) Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 13-May-2025 18:50:08