BOCHASANWASI SHREE AKSHAR PURUSHOTTAM SWAMINARAYAN SANSTHA V. COMMISSIONER OF CUSTOMS, AHMEDABAD

TAXAP/526/2022

AI Insights

The case involves Bochasanwasi Shree Akshar Purushottam Swaminarayan Sanstha, the appellant, who imported marble for the construction of Akshardham Temple in Delhi, which was donated as a free gift. The Customs authorities initially assessed the value of the marble higher than declared, leading to a dispute over the differential duty. After a series of appeals and reassessments, the appellant sought a refund of the pre-deposit made during the litigation, along with interest. The primary legal issues revolved around the appropriate rate of interest for the refund and the entitlement to interest on the delayed payment of interest. The CESTAT and subsequent judicial reviews consistently applied the statutory interest rate of 6% per annum and denied interest on delayed payment of interest, referencing specific provisions of the Customs Act and relevant notifications.

• Counselvise Citation: [2022] 140 COUNSELVISE.COM (IT) 690878 (HC-GUJARAT)
• Appeal Type: Others
• Pronouncement Date: 08-09-2022
• Assessment Year: misc
• Other Referred Cases: Sandvik Asia Ltd. v. Commissioner of Income Tax-I, Pune, Shri Jagdamba Polymers Ltd. v. Union of India, Nelco Limited v. Union of India, D.J. Works v. State, Super Electronics v. Union of India, Commissioner of Income Tax, Gujarat v. Gujarat Fluoro Chemicals
• Laws Referred To: Customs Act, 1962
• Result in Favour of: Revenue
• Court: HIGH COURT
• Assessee Lawyers: HARDIK MODH
• Keywords: Customs Act; Interest on Refund; Rate of interest; Refund of pre-deposit
• Section: 27A; 27(1); 130

Judgement Text

"C/TAXAP/526/2022 ORDER DATED: 08/09/2022 IN THE HIGH COURT OF GUJARAT AT AHMEDABAD R/TAX APPEAL NO. 526 of 2022 ========================================================== BOCHASANWASI SHREE AKSHAR PURUSHOTTAM SWAMINARAYAN SANSTHA Versus COMMISSIONER OF CUSTOMS, AHMEDABAD ========================================================== Appearance: MR HARDIK P MODH(5344) for the Appellant(s) No. 1 for the Opponent(s) No. 1 ========================================================== CORAM:HONOURABLE MR. JUSTICE N.V.ANJARIA and HONOURABLE MR. JUSTICE BHARGAV D. KARIA Date : 08/09/2022 ORAL ORDER (PER : HONOURABLE MR. JUSTICE BHARGAV D. KARIA) 1.By this appeal preferred under section 130 of the Customs Act, 1962 (For short “the Customs Act”) the appellant has challenged the order No.A/12513 of 2021 dated 18.11.2021 passed by the Customs, Excise and Service Tax Appellate Tribunal (For short “the CESTAT”). 2.The appellant has raised the following Page 1 of 23 C/TAXAP/526/2022 ORDER DATED: 08/09/2022 substantial questions of law: “1) Whether the rate of interest should be 6% or 15% or any other rate on the refund allowed by the authorities below? 2) Whether the Appellant is entitled interest on the interest, on the refund amount allowed to the Appellant?” 3.Brief facts of the case are that the appellant imported marble for construction of Akshardham Temple at Delhi. The said marble was donated to the appellant as free gift. In the Bill of Entry, the declared value was US$ 85 Per Metric Ton (PMT). 4.The Assistant Commissioner of Customs by passing the Order-in-Original No.08/ICD/2004 dated 10.08.2004 enhanced the declared the assessable value to US$300 PMT confirming the differential duty on the imported marble and demand was raised. 5.The appellant being aggrieved challenged the Page 2 of 23 C/TAXAP/526/2022 ORDER DATED: 08/09/2022 Order-in-Original before the Commissioner of Customs(Appeals) who by order dated 23.12.2004 directed pre-deposit of Rs. 1.25 crores. 6.The appellant challenged the stay order dated 23.12.2004 before this Court. This Court by order dated 21.02.2005 modified the direction of pre-deposit by permitting the appellant to pay Rs. 25 lakhs and submit bank guarantee for the remaining amount of Rs. 1 crore. 7.The Commissioner(Appeals) by order dated 29.06.2005 rejected the appeal preferred by the appellant. Consequently, the bank guarantee furnished by the appellant was encashed by the Revenue on 15.07.2005. 8.The appellant challenged the Order-in-Appeal before the CESTAT who by final order dated 3.01.2006 allowed the appeal by directing Page 3 of 23 C/TAXAP/526/2022 ORDER DATED: 08/09/2022 the reassessment of the imported marble @ US $95 PMT plus actual freight and insurance. 9.Revenue preferred an appeal before the Supreme Court being Civil Appeal No. D 9783/2006 which was dismissed by order dated 17.11.2006. 10. The appellant therefore, filed an application seeking refund of the pre-deposit of Rs. 1.25 crores made by it and realized by the Revenue along with interest. 11. Vide Order-in-Original dated 22.02.2007, refund claim of Rs. 1.25 crores was sanctioned by the Deputy Commissioner but the prayer for payment of interest was declined on the ground that the the refund was not relatable to section 27(1) of the Customs Act. Page 4 of 23 C/TAXAP/526/2022 ORDER DATED: 08/09/2022 12. The appellant therefore, preferred an appeal before the Commissioner (Appeals) who vide Order-in-Appeal dated 29.01.2008 ordered to pay interest on refunded pre-deposit amount of Rs. 1.25 crores to be paid with effect from 03.01.2006 i.e. from the expiry of three months from the date of passing of the final order by the CESTAT. 13. Revenue being aggrieved preferred appeal before CESTAT who by final order dated 19.08.2008 dismissed the appeal upholding the findings of the Commissioner(Appeals) for payment of interest on the refunded amount of Rs. 1.25 crores. 14. The Revenue thereafter preferred appeal before this Court which came to be rejected by order dated 10.03.2010. 15. The appellant thereafter filed an Page 5 of 23 C/TAXAP/526/2022 ORDER DATED: 08/09/2022 application/letter dated 21.04.2010 before the Assistant Commissioner (Customs) requesting for release of the interest which was worked out to Rs. 51,10,751/-. However by Order-in-Original dated 07.05.2010, the Assistant Commissioner sanctioned interest to the extent of Rs. 6,67,808/- and rejected the prayer for interest in respect of balance amount of Rs. 44,42,943/-. 16. The Assistant Commissioner rejected the amount of interest of Rs. 44,42,943/- considering the provisions of section 27A of the Customs Act which provides for relevant date. It was also held that as per section 27 of the Customs Act read with Notification no. 75/2003-Cus(N.T.) dated 12.09.2003, rate of interest has been prescribed at 6% per annum for the purpose of section 27A of the Customs Act and the claim of the appellant for interest of Rs.17,25,364/- on delayed payment Page 6 of 23 C/TAXAP/526/2022 ORDER DATED: 08/09/2022 of interest cannot be granted in view of decision of CESTAT in case of Sun Pharmaceuticals Ltd. reported in 2005 (185) ELT 253 (Tri-LB) wherein it is held that interest on delayed payment of interest cannot be held to be permissible under the Central Excise Act and the Rules made thereunder for want of any specific provision in the Act or the Rules. Accordingly, interest liability for the period from 04.04.2006 to 22.02.2007 (325 days) at the rate of 6% per annum was calculated at Rs.6,67,808/- by the Assistant Commissioner. 17. The appellant therefore, being aggrieved by the aforesaid order preferred an appeal before the Commissioner(Appeals) who vide order dated 21.12.2010 rejected the appeal confirming the Order-in-Original. 18. The appellant thereafter preferred Page 7 of 23 C/TAXAP/526/2022 ORDER DATED: 08/09/2022 Customs Appeal No.63 of 2011 before CESTAT. CESTAT by the impugned judgment and order dated 18.11.2021 rejected the appeal on both the grounds of rate of interest as well as on interest on interest by considering the judgment of the Supreme Court in Civil Appeal No. D/9783/2006 in case of the appellant and directions issued by the Tribunal in its order dated 19.08.2008 whereby the appeal of the Revenue was dismissed confirming the Order-in-Appeal passed by the Commissioner(Appeals) ordering that interest on refund of pre-deposit amount of Rs. 1.25 crores to be paid with effect from 3.01.2006 as under: “3............. In the normal course pre- deposit should be refunded as soon as the Tribunal order was passed by finalizing the assessment. In the absence of a stay by the Hon'ble Supreme Court and the Board's instruction finalization of assessment and refund was warranted and therefore, interest liability arises from the date of the order of the tribunal and not the date of Page 8 of 23 C/TAXAP/526/2022 ORDER DATED: 08/09/2022 judgment of the Hon'ble Supreme Court. In this view of the matter we hold that the impugned order of the Commissioner (Appeals) is to be upheld and accordingly, we reject the appeal filed by the Revenue against the order” 19. This Court vide order dated 10.03.2010 passed in Tax Appeal No.218 of 2009 while dismissing the appeal of the Revenue observed as under: “8. Vide order dated 3.1.2006, the Tribunal had finalized the assessment and had directed that the value of the marble blocks imported by the respondent should be assessed at US $ 95 PMT, hence there was nothing left for the original authority to finalize except quantification of duty, which he appears to have done at a belated stage. As per the Board's instructions interest liability arises from the date of finalization of assessment. In the present case the assessment came to be finalized by the order dated 3.1.2006 of the Tribunal as the said order was not stayed at any point of time and the appeal against the same came to be dismissed. Hence, liability to pay interest would arise from the date of the order of the Tribunal. In the circumstances, the impugned order of the Tribunal confirming the order made by Commissioner (Appeals) does not suffer from any legal infirmity so as to warrant interference. Page 9 of 23 C/TAXAP/526/2022 ORDER DATED: 08/09/2022 20. In view of above orders passed by this Court, liability to pay interest would arise from the date of order of Tribunal and this finding of the Tribunal as well as this Court has attained finality and therefore, the Tribunal held that the appellant was entitled to interest from the date of order of the Tribunal and not from expiry of three months from the date of order and accordingly, the order passed by the Assistant Commissioner confirmed by the Commissioner(Appeal) was modified. 21. With regard to the rate of interest which is statutorily prescribed under section 27A read with Notification no. 75/2003- Cus(N.T.) dated 12.09.2003, the Tribunal held that Revenue is bound to follow the statutory provision strictly and therefore, no interest more than 6% can be awarded and therefore, it Page 10 of 23 C/TAXAP/526/2022 ORDER DATED: 08/09/2022 was held that rate of interest at the rate of 6% decided by the lower authority is correct and legal. 22. Learned advocate Mr. Modh relied upon the following decisions in support of the claim of the appellant for claim of higher rate of interest than 6%: 1) Sandvik Asia Ltd. v. Commissioner of Income Tax-I, Pune reported in 2006 (196) ELT 257 (SC), wherein the Apex Court after considering the position of law held that interest is nothing but compensation for delayed payment as under: “48. This is the fit and proper case in which action should be initiated against all the officers concerned who were all in charge of this case at the appropriate and relevant point of time and because of whose inaction the appellant was made to suffer both financially and mentally, even though the amount was liable to be refunded in the year 1986 and even prior to. A copy of this judgment will be forwarded to Page 11 of 23 C/TAXAP/526/2022 ORDER DATED: 08/09/2022 the Hon'ble Minister for Finance for his perusal and further appropriate action against the erring officials on whose lethargic and adamant attitude the Department has to suffer financially. 49. By allowing this appeal, the Income-tax Department would have to pay a huge sum of money by way of compensation at the rate specified in the Act, varying from 12% to 15% which would be on the high side. Though, we hold that the Department is solely responsible for the delayed payment, we feel that the interest of justice would be amply met if we order payment of simple interest @ 9% p.a. from the date it became payable till the date it is actually paid. Even though the appellant is entitled to interest prior to 31.03.1986, learned counsel for the appellant fairly restricted his claim towards interest from 31.03.1986 to 27.03.1998 on which date a sum of Rs.40,84,906/- was refunded.” 2) Shri Jagdamba Polymers Ltd. v. Union of India reported in 2013 (289) ELT 429 (Guj.), wherein this Court held as under: “17. Legal position is thus abundantly clear. It is true that the decision of this court in case of Afrique Tradelinks Pvt. Ltd. (supra) and the Apex Court in the case of Ranbaxy Laboratories Ltd. Page 12 of 23 C/TAXAP/526/2022 ORDER DATED: 08/09/2022 supra) were rendered subsequent to the Deputy Commissioner taking a contrary view. However, the Departmental clarification itself was sufficiently clear and was binding on the Deputy Commissioner. Reference to the decision of the Tribunal in case of Bharat Heavy Electricals Ltd. was wholly erroneous. All that the Allahabad High Court in case of Super Electronics (supra) provided was for interest after three months of the date of refund application. 18. As already noted, the petitioners were made to engage in continuous litigation for years together before initially their refund claims were sanctioned even after the issue of classification by the Board and the appeal was decided in their favour. Thereafter, on such refund, interest was improperly denied. Eventually, interest was also paid after a delay of 530 odd days. If such principal claim of refund was sanctioned with interest, question of further interest would not have arisen. In the present case, sizable amount of interest in excess of Rs.1 crore was withheld wholly illegally for over 530 days. With these peculiar facts, we may now look at some of the decisions cited before us. 19. In case of Sandvik Asia Ltd. (supra), the Apex Court considering the gross delay caused by the Department in realising the interest, held that such interest Page 13 of 23 C/TAXAP/526/2022 ORDER DATED: 08/09/2022 would be paid with interest. It was observed as under:- “28. In our view, there is no question of the delay being 'justifiable' as is argued and in any event if the revenue takes an erroneous view of the law, that cannot mean that the withholding of monies is 'justifiable' or 'not wrongful'. There is no exception to the principle laid down for an allegedly 'justifiable' withholding, and even if there was, 17 (or 12) years delay has not been and cannot in the circumstances be justified.” 20. Way back in the year 1992, a Division Bench of this court in case of D.J. Works (supra) had similarly in the background of the Income Tax Act, 1961 held that the assessee would be entitled to interest on delayed payment of interest. 21. We are conscious that ordinarily grant of interest flows either from statutory provision or contractual relations between the parties. In the present case, there is no statutory provision providing for interest on interest. In the present case, however, we find that the excise authorities acted rather unjustly and initially delayed not only the refund, but thereafter, unjustly withheld the interest payable thereon. At all stages, the petitioners had to approach higher authorities in further appeals. Though the Commissioner (Appeals) Page 14 of 23 C/TAXAP/526/2022 ORDER DATED: 08/09/2022 had specifically provided that the refund shall be granted alongwith interest under section 11BB if payable, the same was not realised on the ground that the interest would be payable only after the date of appellate order and that the refund application was filed after the date of the appellate order completely ignoring the fact that refund claims were filed much earlier and also ignoring the instructions of the CBEC issued in exercise of powers under section 37B of the Act. 22. In sum and substance, in the facts of the present case, the Department cannot avoid the liability of accounting for interest on the delayed payment of interest to the extent the same was paid late. Since such claim does not fall within the statutory provisions contained in section 11BB of the Act, in exercise of writ jurisdiction, we would not direct payment of such interest at the statutory rate but would provide for reasonable interest looking to the present trend. Under the circumstances, the petition is allowed. The respondents shall pay simple interest at the rate of 9% per annum on the sum of Rs.1,06,12,678/- for the period between 1-4-2003 to 23-9-2004 which shall be done within a period of eight weeks from the date of receipt of a copy of this order. The petition is disposed of accordingly. Page 15 of 23 C/TAXAP/526/2022 ORDER DATED: 08/09/2022 Rule made absolute. No costs.” 3) Suvidhe Ltd. v. Union of India reported in 1996(82) ELT 177 (Bom.), wherein Bombay High Court held as under: “3. In respect of such a deposit the doctrine of unjust enrichment will be inapplicable. In the circumstances, the petition succeeds. The impugned show cause notice, which is annexed at Exhibit- F to the petition, is quashed and the respondents are directed to forthwith refund the aforesaid amount of Rs. 14,07,410/- along with interest thereon at the rate of 15% p. a. from the date of the order of the Appellate Tribunal i.e. from 30th November, 1993 till payment.” 4) Nelco Limited v. Union of India reported in 2002 (144) ELT 56 (Bom.), wherein Bombay High Court held as under: “7. In these circumstances, we are of the view that the Petitioner is entitled to interest at the rate of fifteen per cent per annum on Rupees Twenty lakhs between 24th January, 1997 to 15th September, 2000. 8. In the result, the writ Petition is allowed and it is directed as follows :- Page 16 of 23 C/TAXAP/526/2022 ORDER DATED: 08/09/2022 (a) The Respondents shall pay simple interest at the rate of fifteen per cent per annum on the amount of Rupees Twenty lakhs for the period 24th January, 1997 to 15th September, 2000.” 23. The Commissioner (Appeals) while rejecting the issue of rate of interest as well as interest on delayed payment of interest has held as under: “6.4. The adjudicating authority has rejected another amount of refund claimed by the appellant, which turned out to be interest on interest. The appellant has relied upon the decision of the Hon'ble Supreme Court has, in Sandvik Asia Ltd. V/S CIT [2006(196) ELT 257(SC), in which the Hon'ble Supreme Court has held that interest is payable on interest so wrongfully withheld, even in absence of any provision in statute to that effect. I have examined the decision of the Hon'ble Supreme Court to ascertain if the said decision can be applied to the present case. I have found that in the said case, the Hon'ble Supreme Court was dealing with the matter relating to the provisions of Income Tax Act. In the case of International Industrial Gases Ltd. Versus Commissioner of C. Excise, Bhopal [Final Order No. 208/2010- Page 17 of 23 C/TAXAP/526/2022 ORDER DATED: 08/09/2022 EX(PB)) dated 8-4 2010 in Appeal No. E/1889/2009] reported at [2010 (254) ELT. 518 (Tri- Del.)], the Tribunal has examined the aforesaid case of Sandvik Asia Ltd and found out the following: \"The decision of the Supreme Court in Sandvik Asia case was on the subject of claim for interest on interest which was withheld for very long period about twenty years, and that too without any justification Besides, that was a case under the Income Tax Act, as also that bare reading of the decision would disclose that the same was granted essentially in exercise of powers under Article 142 of the Constitution of India. This is apparent from the decision of the Apex Court\" Besides, I have also in hand the ruling of the Hon'ble Apex Court in Dai Ichi Karkaria case whereby it was observed that the judgement relating to the Income Tax or other statutes have no relevance while considering a provision in an Excise statute: Even though we are not concerned in the matter in hand regarding the interpretation of any statutory provision in Customs Act as such, to ascertain the scope of powers of the statutory authorities functioning under the Customs Act, we cannot have assistance of the decision which was delivered in relation to the scope of powers of the authorities functioning under Page 18 of 23 C/TAXAP/526/2022 ORDER DATED: 08/09/2022 Income Tax Act or other taxing statutes. Having said so, I am also guided by the Larger Bench decision in the case Sun Pharmaceuticals Industries Ltd. v. Commissioner (2005 (185) E.L.T. 253 (Tribunal- LB)], which has also been relied upon by the Tribunal in the aforesaid case of International Industrial Cases Ltd., which reads as under: \"In the light of what has been discussed above, on the basis of the above referred two judgments of the Gujarat High Court, which are under different Tax statute, interest on delayed payment of interest, cannot be held to be permissible under the Central excise Act and the Rules made thereunder, for want of any specific provision in the Act or the Rules. Therefore, the Tribunal has no power to award such interest to the assessee. The law laid down in Hindustan Motors v. C.C.E. (supra), to the contrary, being not a good law, stands overruled: The reference stands accordingly answered\" The provisions of Central Excise Act, 1944 and the Customs Act 1962, relating to interest on delayed payment of refunds, are in pari materia, and hence this decision can be squarely made applicable to the present case. Being a creature of statute, I hold that the Commissioner (Appeals) has no power Page 19 of 23 C/TAXAP/526/2022 ORDER DATED: 08/09/2022 to award interest on the interest amount to the appellant.” 24. The Tribunal therefore, considering the above findings came to the conclusion that in absence of any statutory provision to award interest more than the rate of 6% per annum as well as interest on interest cannot be awarded and accordingly, the appeal was ordered to be dismissed. 25. As per Notification no. 75/2003- Cus(N.T.) dated 12.09.2003, rate of interest has been prescribed at 6% per annum for the purpose of section 27A of the Customs Act which is statutory provision and the notification is binding upon the revenue authority and, therefore, the appellate authorities and CESTAT have rightly come to the conclusion that the appellant is entitled to rate of interest at the rate of 6% per annum only and not at the rate of 15% as Page 20 of 23 C/TAXAP/526/2022 ORDER DATED: 08/09/2022 claimed by the appellant. 26. The Hon’ble Supreme Court in case of Commissioner of Income Tax, Gujarat v. Gujarat Fluoro Chemicals reported in (2014) 1 Supreme Court Cases 126 clarified the decision of Sandvik Asia Ltd. (supra) observing that Supreme Court did not direct the payment of interest on interest as under: “4. We would first throw light on the reasoning and the decision of this Court on the core issue in Sandvik case (supra). The only issue formulated by this Court for its consideration and decision was whether an assessee is entitled to be compensated by the Income Tax Department for the delay in paying interest on the refunded amount admittedly due to the assessee. This Court in the facts of the said case had noticed that there was delay of various periods, ranging from 12 to 17 years, in such payment by the Revenue. This Court had further referred to the several decisions which were brought to its notice and also referred to the relevant provisions of the Act which provide for refunds to be made by the Revenue when a superior forum directs refund of certain amounts to an assessee while disposing of an appeal, revision etc. Page 21 of 23 C/TAXAP/526/2022 ORDER DATED: 08/09/2022 5. Since, there was an inordinate delay on the part of the Revenue in refunding the amount due to the assessee this Court had thought it fit that the assessee should be properly and adequately compensated and therefore in paragraph 51 of the judgment, the Court while compensating the assessee had directed the Revenue to pay a compensation by way of interest for two periods, namely; for the Assessment Years 1977-78, 1978-79, 1981-82, 1982- 83 in a sum of Rs.40,84,906/- and interest @ 9% from 31.03.1986 to 27.03.1998 and in default, to pay the penal interest @ 15% per annum for the aforesaid period. 6. In our considered view, the aforesaid judgment has been misquoted and misinterpreted by the assessees and also by the Revenue. They are of the view that in Sandvik case (supra) this Court had directed the Revenue to pay interest on the statutory interest in case of delay in the payment. In other words, the interpretation placed is that the Revenue is obliged to pay an interest on interest in the event of its failure to refund the interest payable within the statutory period. 7. As we have already noticed, in Sandvik case (supra) this Court was considering the issue whether an assessee who is made to wait for refund of interest for decades be compensated for the great prejudice caused to it due to the delay in its payment after the lapse of statutory period. In the facts of that case, this Court had come to the conclusion that there was an inordinate delay on the part of the Page 22 of 23 C/TAXAP/526/2022 ORDER DATED: 08/09/2022 Revenue in refunding certain amount which included the statutory interest and therefore, directed the Revenue to pay compensation for the same not an interest on interest.” 27. In view of above position of law, we are of the opinion that the appellant is entitled to rate of interest at 6% per annum only and appellant is not entitled to interest on delayed payment of interest as claimed by the appellant. Therefore, no question of law much-less any substantial question of law arises out of the impugned order. 28. The appeal stands dismissed. No order as to costs. (N.V.ANJARIA, J) (BHARGAV D. KARIA, J) RAGHUNATH R NAIR Page 23 of 23 "