HC Grants Interest on Delayed Customs Refunds After Seven Years

The petitioners approached the High Court seeking interest on delayed customs duty refunds arising from import of mobile phones and components. At the time of import, Additional Customs Duty (ACD) had been paid. After the Supreme Court ruling in SRF Ltd. v. Commissioner of Customs, the petitioners applied for re-assessment of their Bills of Entry, claiming that such duty was not payable. However, while these applications were pending, the legal position shifted following ITC Ltd. v. Commissioner of Central Excise, which led to further delays. Though the department eventually granted refunds, it denied interest, arguing that the delay was due to legal uncertainty and that interest would be payable only after completion of re-assessment.

Issue Raised: Whether interest is payable on delayed customs refunds and from which date such interest should be calculated.

HC’s Rulling: The High Court ruled in favour of the petitioners and rejected the Revenue’s stand. It noted that the refunds were delayed by more than seven years, which was clearly excessive. The Court held that such delay whether due to administrative reasons or shifting legal positions cannot deprive taxpayers of compensation for being kept out of their money. It emphasised that interest on refunds is a statutory right, not a discretionary relief. It further clarified that once a refund or re-assessment application is filed, the starting point for interest cannot be pushed forward due to later legal developments. Therefore, the Court directed the department to pay interest under Section 27A of the Customs Act from the date of the initial re-assessment applications until the date of actual refund.

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