Commissioner of Customs Vs Vedanta Ltd (Orissa High Court)
Summary: The Orissa High Court dealt with an appeal filed by the Department against an order of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) directing payment of interest to Vedanta Ltd. on the excess amount of customs duty that had been retained by the Department for a prolonged period of nearly 14 years. The dispute arose due to inordinate delay in finalizing the provisional assessment and refunding the excess duty paid.
According to the facts, Vedanta Ltd. had imported goods on which duty was provisionally assessed under Section 18 of the Customs Act, 1962. As per the provision, customs authorities may assess duty provisionally pending submission of documents or completion of tests, and subsequently finalize the assessment once all required information is received. Vedanta paid the duty as provisionally assessed and cleared the goods. Later, after verification of documents and materials, it was found that the goods were misclassified and attracted a lower rate of duty. Consequently, the authorities accepted that excess duty had been paid and granted a refund. However, the process took nearly fourteen years, during which time the Department retained the excess amount.
Vedanta then filed a representation seeking interest on the refunded sum, arguing that the delay was unreasonable and compensatory interest was due for the period during which the amount was withheld. The authorities rejected the claim, but on appeal, the Customs, Excise and Service Tax Appellate Tribunal allowed interest at the rate of 12% per annum from the date of the first assessment order. The Department challenged this order before the High Court, arguing that the Tribunal had exceeded its powers and lacked jurisdiction to grant such compensatory interest.
