Customs Liable to Pay Interest as EDD Refund Was Delayed After Final Assessment: CESTAT Mumbai

Vardhman Acrylics Limited Vs Commissioner of Customs (Imports) (CESTAT Mumbai)

The appeals were filed by the appellant against the Commissioner (Appeals)’ order dated 28.06.2019, which upheld the denial of interest on the delayed refund of Extra Duty Deposit (EDD) collected during provisional assessment of imports made from a related foreign supplier. The imports, made between October 1997 and April 1998, were provisionally assessed because the valuation of related-party transactions was under examination by the Special Valuation Branch (SVB). The appellant executed provisional duty bonds and deposited EDD ranging from 1% to 5% of the declared assessable value in accordance with CBEC instructions.

The SVB, by Order-in-Original dated 26.10.1998, held that the relationship between the importer and the overseas supplier had not influenced the transaction value and accepted the declared invoice value. It directed that all pending provisional assessments be finalized accordingly and that the EDD be refunded wherever applicable. Based on this order, the appellant filed refund applications on 22.01.1999. However, the department challenged the SVB order, leading to prolonged litigation before the Commissioner (Appeals), the Tribunal, and the Bombay High Court. Ultimately, the departmental challenge failed, and the provisional assessments were finalized in 2008. Although the refund amounts were sanctioned, they were credited to the Consumer Welfare Fund on the ground of unjust enrichment, resulting in further rounds of litigation.