The Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Ahmedabad Bench ruled that the CESTAT is not empowered to allow Interest on Interest for delayed payment of Customs refunds in absence of statutory provision.
The issue raised was whether the appellant, Bochasanwasi Shri Aksharpurushottam Swaminarayan Sansth is entitled to interest on the interest amount.
The appellant has heavily relied upon the Supreme Court Judgment in Sandvik Asia Ltd.
The Commissioner (Appeals) on this issue observed that the decision of the Supreme Court in the Sandvik Asia case was on the subject of the claim for interest on interest which was withheld for a very long period about twenty years and that too without any justification. Besides, that was a case under the Income Tax Act, as also that bare reading of the decision would disclose that the same was granted essentially in the exercise of powers under Article 142 of the Constitution of India. This is apparent from the decision of the Apex Court.
The Commissioner (Appeals) has concluded that being a creature of the statute he has no power to allow interest on interest amount to the appellant. We do not find any infirmity in the above finding.
The Coram of Judicial Member Ramesh Nair and Technical Member P.Anjani Kumar M held that this Tribunal being a creature under the statute of customs Act cannot decide anything beyond the provisions of the statute of the Customs Act. There is no statutory provision for granting the interest on interest. Therefore, the decision on this issue by the Learned Commissioner (Appeals) is legal and correct.
“As regards, the issue i.e. rate of interest, the rate of interest is statutorily prescribed under section 27 (A) read with Notification issued thereunder according to which 6% as rate of interest was prescribed. The departmental officer is bound to follow the statutory provision strictly and therefore, no interest of more than 6% can be calculated. Even this tribunal which is a creature under the statute of Customs Act cannot decide the rate of interest out of the statutory provisions. Accordingly, the rate of interest i.e. 6% decided by the Lower Authority is correct and legal. As regards the judgment cited by the appellant for higher interest, we find that all those cases have been decided either by the Hon’ble Supreme Court or Hon’ble High Court which had inherent powers can fix any rate of interest but this tribunal has no power to decide any rate of interest different than prescribed under the statute. Therefore, Learned Commissioner (Appeals) has rightly held that the Adjudicating Authority has rightly applied a simple rate of interest as 6% P.a. Therefore, the assessee cannot be granted interest at the rate of 15% or any other rate above 6%,” the CESTAT ruled.
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