M/S Sapna Saree Centre vs. Union Of INDIA

Held

The Court held that the petitioners are entitled to statutory interest on the delayed refund of Special Additional Duty (SAD) under Section 27-A of the Customs Act, 1962. The Court found that the refund applications were filed in 2009-2011 and the refunds were sanctioned and paid in 2019, indicating a significant delay. Section 27-A clearly mandates payment of interest if a refund is not processed within three months of the application. The Court reasoned that the interdepartmental lack of clarity or procedural gaps in processing the refund claims, which led to the delay, should not affect the statutory right of the petitioners to receive interest. The revenue's argument that the authority was not empowered to settle claims prior to March 31, 2017, was implicitly rejected as the Court directed the calculation and payment of interest. The Court ordered the respondent No. 2 to revise the refund orders and calculate and pay the statutory interest as per Section 27-A of the Customs Act within four weeks.

Facts

The petitioners, engaged in trading used clothes, purchased goods from an SEZ unit. These goods were subject to customs duties, including a 4% Special Additional Duty (SAD). Notification No. 102/2007 exempted this SAD if goods were imported for subsequent sale. The petitioners were entitled to a refund of the SAD paid. They filed refund applications between October 2009 and January 2011. These applications remained undecided, leading the petitioners to file earlier writ petitions. Following the court's direction, refunds were sanctioned and paid in March and April 2019. The petitioners then claimed interest on these delayed refunds under Section 27-A of the Customs Act, 1962, but received no response. They filed the present petitions seeking a writ to direct the respondent to revise the refund orders to include statutory interest.

Key Issues

1. Whether the petitioners are entitled to statutory interest on the delayed refund of Special Additional Duty (SAD) under Section 27-A of the Customs Act, 1962, for the period prior to March 31, 2017, when Circular No. 11/2017 was issued? Petitioner's arguments: The petitioners argued that they are entitled to interest on the delayed refund as per Section 27-A of the Customs Act, 1962, as their refund applications were sanctioned after a significant delay of over seven years. They contended that the interdepartmental procedural gap or lack of clarity in processing refund claims should not prejudice their statutory right to interest. They relied on the fact that the refund itself was sanctioned, implying their entitlement to the principal amount. Revenue's arguments: The revenue contended that interest could not be allowed retrospectively as the Customs House, Kandla, was not empowered to settle the refund claim prior to March 31, 2017, the date of Circular No. 11/2017. They cited the Standard Operating Procedure (SOP) for dealing with old refund cases pending as of that date. However, they did not dispute the petitioners' entitlement to interest in principle.