Relief to JSW Steel: CESTAT Rules Revenue Cannot Deny Interest on EDD Refund Due to Pending Finalisation of Bills of Entry [Read Order]

JSW Steel Limited, the respondent, imported different grades of coal from its related overseas supplier, JSW International Tradecorp Pte. Ltd., Singapore, through Marmagoa Port during 2014-15 and 2015-16. Since the imports were between related parties, the Bills of Entry were provisionally assessed and the company was asked to pay 1% EDD during the SVB investigation.

Later, the SVB, GATT Valuation Cell, Mumbai, passed an order on 09.09.2015 holding that the relationship between the importer and supplier had not affected the transaction value. The declared invoice value was accepted under the Customs Valuation Rules, 2007.

After this order, the company filed refund application on 23.03.2016 seeking refund of Rs. 21.17 crore paid as EDD. The company also submitted supporting documents like SVB order, CA certificate, EDD challans and copies of Bills of Entry. But the refund section informed the company that the refund claim could not be processed because the Bills of Entry were still pending for finalisation.

Later, the assessment group finalised the provisional assessments on issues like testing, demurrage and draft survey reports. The refund amount was sanctioned on 27.07.2017, but interest on delayed refund was denied by the department saying that the proper refund application was filed only on 05.05.2017.

Aggrieved by this, the company approached the Commissioner (Appeals), who held that interest was payable after expiry of three months from the original refund application filed on 30.03.2016. The Revenue challenged this order before the CESTAT.

The revenue counsel argued that the original refund application was incomplete and refund could not be granted before finalisation of Bills of Entry.

The respondent’s counsel argued that EDD was collected only for SVB investigation and once the SVB accepted the declared value, the amount became refundable. The counsel also argued that refund of EDD was not connected with other pending assessment issues.

The two-member bench comprising S.K. Mohanty (Judicial Member) and M.M. Parthiban (Technical Member) observed that EDD is not customs duty but only an amount collected during SVB investigation in related party import cases. The tribunal observed that once the SVB accepted the declared value, there was no reason for the department to keep the EDD amount.

The tribunal also observed that the refund application filed by JSW Steel on 30.03.2016 was complete and supported with proper documents. The tribunal pointed out that the refund section should not delay the refund only because Bills of Entry were pending finalisation on other issues.

The tribunal explained that departmental delay cannot take away the importer’s right to get interest on delayed refund. Relying on the Supreme Court judgment in Ranbaxy Laboratories Ltd., the tribunal held that interest becomes payable after expiry of three months from the date of receipt of refund application.

The tribunal upheld the order granting interest to JSW Steel on delayed refund of EDD and dismissed the Revenue’s appeal.

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