Case Law Details
Nanda Agency House Shipping Services Pvt Ltd Vs Commissioner of Customs (CESTAT Chennai)
Introduction: The Nanda Agency House Shipping Services Pvt Ltd Vs Commissioner of Customs case decided by CESTAT Chennai presents significant questions regarding interest rates on delayed customs duty refunds.
Delay in Refund and the Request for Enhanced Interest: Nanda Agency had imported a “Glass Bottom Boat Looker 350” and was initially charged a significant customs duty based on what the department considered to be the “correct classification” of the product. Upon reclassification, Nanda Agency was entitled to a refund, which was delayed by 253 days. Following this, they filed another application seeking interest on the delayed refund.
Arguments from Nanda Agency: The appellant, represented by Ms. Madhumitta Bagchi, argued that the delay had caused them immense financial burden. The loan taken to pay the original duty was at an interest rate of 12.45%, and the delay had further led to borrowing from private financiers. They requested an enhanced interest rate of 9% due to these constraints.
Government’s Standpoint: The government, represented by Ld. A.R Sri R. Rajaraman, argued that interest should only be paid after a 3-month delay from the date of the refund application and that the 6% rate was appropriate as per Section 27A of the Customs Act, 1962.
Judicial Verdict: The CESTAT Chennai ruled that the appellant was entitled to a 6% interest rate on the delayed refund. The ruling referenced decisions in Pfizer Products India Pvt. Ltd. and Ranbaxy Laboratories Ltd. to support that a higher rate of interest is not always warranted.
Conclusion: The Tribunal’s decision highlights the importance of adhering to regulatory guidelines when determining interest rates on delayed refunds. While Nanda Agency’s financial hardships were noted, the Tribunal upheld the 6% rate, reiterating that exceptional circumstances are required to deviate from the standard rates specified in law.
FULL TEXT OF THE CESTAT CHENNAI ORDER
The above appeal is filed by the appellant against the order passed by Commissioner (Appeals) who granted interest on delayed refund at notified rate of interest (6%) to the appellant and disallowed the prayer for enhanced rate of interest.
2. Brief facts are that, appellant M/s. Nanda Agency House Shipping Services Pvt. Ltd. filed Bill of Entry dt. 28.08.2015 for clearance of goods viz. “Glass Bottom Boat Looker 350” for which classification was declared as CTH 89011030 attracting ‘Nil’ rate of duty. The Department was of the view that the correct classification was CTH 89039200 attracting merit rate of duty which resulted in payment of duty of Rs.93,47,327/- by the appellant. Thereafter, the bill of entry was reassessed classifying the goods under CTH 89011030 at ‘Nil’ rate of duty itself. The appellant filed refund claim of the duty of Rs.93,47,327/- paid by them vide challan dt. 01.09.2015. The refund claim was filed on 03.02.2016. The refund ought to have been granted on 03.05.2016. However, the refund was granted only on 11.01.2017. There was a delay of 253 days in granting the refund. The appellant therefore filed another application for interest on the delayed refund to the tune of Rs.68,01,648/- on 03.07.2017 under Section 27A of Customs Act, 1962. The said claim of interest was rejected vide Order-in-Original dt. 18.04.2018. Aggrieved by such order, the appellant filed appeal before the Commissioner (Appeals) who vide order dt. 22.06.2018 directed to pay interest from 03.05.2016 to 11.01.2017 @ 6%. Accordingly, the appellant was sanctioned interest of Rs.3,88,746/-. Aggrieved by such order passed by Commissioner (Appeals) who has granted interest only @ 6%, the appellant is now before the Tribunal.
3. Ld. Counsel Ms. Madhumitta Bagchi appeared and argued for the appellant. It is submitted that the appellant had imported Looker Boat from Russia and had furnished all the records before the department evidencing that the Boat is a 30 seater boat meant for tourism purposes only. However, the department adopted the classification under CTH 89039200 by which the appellant had to pay a huge amount as duty. The said amount was borrowed as loan from State Bank of India, Mohanpuram, Port Blair at the interest rate of 12.45% per annum. The duty was paid on 01.09.2015 and after retaining it for 16 months, the same has been refunded only on 11.01.2017. The appellant in order to obtain the refund of the customs duty had to travel eleven times in between Port Blair and Chennai which involved huge expenditure. The appellant had intended to start business using the imported boat for the purpose of tourism. All these eventualities caused immense financial constraints upon the appellant who had to borrow loan from private financiers also. The appellant is suffering huge monetary loss due to the interest paid to the bank and other private financial institutions. It is prayed that the appellant ought to be allowed interest at the rate of 9% for 455 days as computed from the date of payment of duty itself.
4. Ld. Counsel relied upon the decision in the case of CC Airport & ACC, Bangalore Vs Pfizer Products India Pvt. Ltd. – 2015 (324) ELT 259 (Kar.) and decision of the Hon’ble Supreme Court in the case of Ranbaxy Laboratories Ltd. Vs Union of India – 2011 (273) ELT 3 (SC). The decision of the Tribunal in the case of BBM Impex Pvt. Ltd. Vs CC New Delhi vide Final Order No.50737/2022 dt. 03.08.2022 was also relied upon. Ld. Counsel prayed that the appeal may be allowed.
5. Ld. A.R Sri R. Rajaraman appeared for the appellant. It is submitted that as per the provisions contained in Section 27A, interest is liable to be paid only in case of delay after 3 months from the date of application of refund. In the present case, the application for refund is filed on 03.02.2016 and the refund ought to have been granted on 03.05.2016. The appellant has received the refund on 11.01.2017. There is delay of 253 days when computed from 03.05.2016 till 11.01.2017. Interest has been sanctioned @ 6% which is the notified rate of interest. There are no special circumstances in the present case to grant increased rate of interest. He prayed that the appeal may be dismissed.
6. Heard both sides.
7. The appellant seeks interest on delayed refund at a higher rate than the notified rate of 6%. So also, they have computed the delay till interest amount @ 6% has been received by them i.e. 04.01.2019. According to them, till the payment of interest @ 6% (04.01.2019) there is a delay of 455 days and further the appellant has to be granted higher rate @ 9%. In the present case, there is a delay of 253 days in granting the refund of duty. The Commissioner (Appeals) has allowed interest @ 6% for the delay upto the date of sanctioning the refund. In the case of Pfizer Products India Pvt. Ltd. (supra) as well as Ranbaxy Laboratories (supra) there was huge delay in granting the refund. The Hon’ble Apex Court had considered all such facts to grant increased rate of interest. The Commissioner (Appeals) has relied on the said cases only to take the view that the appellant is eligible for interest due to delay. This does not mean that an assessee is always eligible for enhanced rate of interest than the notified rate of interest. We do not find any circumstances in the present case warranting to grant increased rate of interest to the appellant. The decision in the case of BBM Impex Pvt. Ltd. (supra) is not applicable to the facts of this case as the same is with regard to the refund of pre-deposit.
8. From the foregoing, the impugned order is sustained. Appeal is dismissed as being devoid of merits.
(Pronounced in court on 24.08.2023)
