In a recent decision, the CESTAT, Ahmedabad bench refused to allow interest on delayed refund of penalty amount already deposited with the Department. The Single Member, while confirming the order of the first appellate authority, observed that no interest is payable on such amount under Section 27A of the Customs Act, 1962.
In the instant case, the appellant-assessee challenged the order of the Commissioner (Appeals) wherein it was held that refunded amount of Rs. 3,68,236/- consisted of penalty of Rs. 2 lakh, and Rs. 1,68,236/- as excess of dues on account of duty or penalty. According to him, no interest can be paid on penalty or on excess dues which are not duty under Section 27A of the Act.
The Tribunal noted the Apex Court decision in Commissioner of Customs (Port) Kolkata vs. Coronation Spinning India, in which the court partly allowed the appeal by holding that interest at the rate of 12% shall be paid to the respondents on the amount of duty and not on fine and penalty.
Based on the above decision, the Single Member observed that “no interest would be payable on delayed refund of penalty of Rs. 2 lakh. However, we find that the Revenue had enchased the bank guarantee in excess of liabilities to the extent of Rs. 1,68,236/-. This amount as mentioned by the Commissioner (Appeals) in the impugned order was in excess of dues on account of duty or penalty. As we have held that no interest would be payable on the delayed refund of penalty of Rs. 2 lakh, the amount of Rs. 1,68,236/- has to be held as in excess of dues on account of duty. If so, then the appellant would be eligible for the interest on the delayed refund of the said amount.”
Read the full text of the order below.
