In a recent decision, the Bombay High Court emphasized that the Ministry of Finance and the Central Board of Excise and Customs must take necessary actions to ensure prompt payment of refund applications in order to avoid revenue loss in payment of statutory interest.
The division bench comprising of Justice S.C Dharmadhikari and Justice B.P Colabawalla observed that, taking expeditious actions in this issue would result in creating a business friendly atmosphere and saving the precious time of the Court.
The petitioners imported certain exempted goods in connection with petroleum operations Bombay High Court undertaken under petroleum exploration licenses.Petitioner could not avail the exemption entitled by them under the said Notification at the time of import, for want of the Essentiality Certificate from the DGH as ONGC did not issue any recommendation letters for issuance of the same.When the matter was brought before the Delhi High Court, the petitioners were served with the above certificate from the DGH as per the direction of the Court. When the matter was disposed in favour of the petitioners, they moved a refund application before the authority in the year 2003. However, the same was rejected for want of Essentiality Certificate.
In the year 2011, the petitioners further forwarded the application of refund filed by them in the year 2003 along with the High Court and the Essentiality Certificate, which was again rejected by the authority.On appeal, the appellate authority directed the refund authority to verify the claim of the petitioners, the petitioners could not get any relief. Being aggrieved, the petitioners approached the High Court directly, challenging the rejection. In pursuance of the said order, refund amount was granted to the petitioners, but without interest. Regarding this, the Department claimed that the refund claim was complete in all respects for sanctioning the refund only after the Petitioner submitted all essential documents at the personal hearing held on 12th May, 2014 and the refund was processed and granted to the Petitioner on 23rd June, 2014. This was well within three months as stipulated under Section 27A. Therefore, the petitioners are not entitled to get interest as per the said provision.
The Court also observed that as per s. 27A of the Act, interest would be payable immediately after expiry of three months from the date of receipt of such application till the date of refund of such duty. The Court further noticed the decision of the apex Court in Ranbaxy Laboratories Ltd Vs. Union of India, in which the Court dealt with s. 11B of the Central Excise Act, which is similar to s.27A of the Customs Act, held that the only interpretation of Section 11-BB that can be arrived at is that interest under the said section becomes payable on the expiry of a period of three months from the date of receipt of the application under sub-section (1) of Section 11-B of the Act and that the said Explanation does not have any bearing or connection with the date from which interest under Section 11-BB of the Act becomes payable.
Following the above judicial pronouncement and the provisions of s. 27A, it was held that once a refund is granted to the applicant and the said refund is not given to the applicant within three months from the date of receipt of the refund application, then the applicant would automatically be entitled to interest on the said refund, from the date immediately after expiry of three months from the date of receipt of such refund application, till the date of the refund of such duty.
Rejecting the findings of the Refund authority, the Court set aside the order impugned and held that the petitioners are entitled to interest from the date immediately after expiry of three months from 20th June,2011 till 11th July, 2014.
The Court further added that “Before parting, we direct that a copy of this order be forwarded to the Secretary, Ministry of Finance (Department of Revenue), Government of India and the Chairman, Central Board of Excise and Customs, New Delhi for necessary action. It is only they who would possibly realise that the object and purpose is to take expeditious action on refund applications so that revenue loss is avoided in payment of statutory interest. The intent is to discourage the tendency of not taking prompt action on these applications, thereby defeating all policies aimed at creating a business friendly atmosphere. They must also realise that litigation in Court on this score results in precious time and money being wasted.”
Read the full text of the Judgment below.
