The Ahmedabad Bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) ruled that interest on sanctioned refunds under customs laws is payable from three months after the application date, not from the date of an appellate order remanding the matter for reconsideration.
Amrapali Industries Ltd., the appellant, filed an appeal challenging the denial of interest on a sanctioned refund under Section 27A of the Customs Act. The appellant’s counsel argued that the interest on the refund should be calculated starting three months after the refund application date.
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The appellant’s counsel relied on several rulings such as Ranbaxy Laboratories Ltd. vs. UOI and J.K. Cement Works vs. Assistant Commissioner of Central Excise which supported the appellant’s argument.
The case arose when the adjudicating authority initially denied the refund claim but later sanctioned it, crediting the amount to the Consumer Welfare Fund. On appeal, the Commissioner (Appeals) remanded the case to the adjudicating authority, which refunded the amount to the appellant upon finding no unjust enrichment but the Commissioner denied interest on the refund.
The department’s counsel argued that interest should not apply from the earlier date, supporting the Commissioner’s decision. The counsel relied on the explanation in Section 27A of the Customs Act to justify the denial.
The tribunal reviewed the legal provisions and prior judgments, including Ranbaxy Laboratories Ltd. vs. UOI, which clarified that interest liability begins three months after the refund application is filed, regardless of delays in appellate decisions. The tribunal explained that the explanation in Section 27A does not alter the timeline for calculating interest.
The single-member bench, comprising Ramesh Nair (Judicial Member) observed that the refund provisions were to prevent undue delays and protect taxpayers from administrative inefficiencies. The tribunal held that the appellant was entitled to interest from three months after the refund application date until the date of sanction.
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The tribunal set aside the Commissioner’s order and upheld the appellant’s entitlement to interest on the delayed refund. The appellant’s appeal was allowed.
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