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Judgment
R. Sudhakar, J.—This writ petition is filed seeking issuance of a writ of certiorarified mandamus to call for the records of Circular No.
6/2008-Customs, dated April 28, 2008 issued by the second respondent, to quash the same in so far as it seeks to restrict or obliterate the claim
of interest on belated refunds granted in terms of Notification No. 102/2007-Customs, dated September 14, 2007 by resort to paragraph 4.3 of
the circular, and to further grant interest as per section 27A of the Customs Act, 1962. Section 3(1) of the Customs Tariff Act, 1975 provides for
imposition of additional duty equal to excise duty for the time being leviable on a like article if produced or manufactured in India. Likewise, in
order to counterbalance sales tax, value added tax, local tax or any other charges, section 3(5) of the Customs Tariff Act, 1975 provides for levy
of special additional duty in addition to duty leviable u/s 3(1) of the Customs Tariff Act, 1975. It is not in dispute that the goods that are imported
by the petitioner attract special additional duty. The Government, however, as a measure to grant certain benefits and on being satisfied that it is
necessary in the public interest to do so, issued Notification No/102/2007-Customs, dated September 14, 2007 in exercise of the powers u/s
25(1) of the Customs Act, 1962 and granted exemption in respect of special additional duty leviable in terms of section 3(5) of the Customs Tariff
Act, 1975 subject to certain conditions. The said notification reads as follows:
Notification No. 102/2007-Customs
New Delhi, September 14, 2007
G.S.R.... (E).-In exercise of the powers conferred by sub-section (1) of section 25 of the Customs Act, 1962 (52 of 1962), the Central
Government, on being satisfied that it is necessary in the public interest so to do, hereby exempts the goods falling within the First Schedule to the
Customs Tariff Act, 1975 (51 of 1975), when imported into India for subsequent sale, from the whole of the additional duty of customs leviable
thereon under sub-section (5) of section 3 of the said Customs Tariff Act (hereinafter referred to as the said additional duty).
The exemption contained in this notification shall be given effect if the following conditions are fulfilled:
(a) the importer of the said goods shall pay all duties, including the said additional duty of customs leviable thereon, as applicable, at the time of
importation of the goods;
(b) the importer, while issuing the invoice for sale of the said goods, shall specifically indicate in the invoice that in respect of the goods covered
therein, no credit of the additional duty of customs levied under sub-section (5) of section 3 of the Customs Tariff Act, 1975 shall be admissible;
(c) the importer shall file a claim for refund of the said additional duty of customs paid on the imported goods with the jurisdictional customs officer;
(d) the importer shall pay on sale of the said goods, appropriate sales tax or value added tax, as the case may, be;
(e).the importer shall, inter alia, provide copies of the following documents along with the refund claim:
(i) document evidencing payment of the said additional duty; (ii) invoices of sale of the imported goods in respect of which refund of the said
additional duty is claimed;
(iii) documents evidencing payment of appropriate sales tax or value added tax, as the case may be, by the importer, on sale of such imported
goods.
The jurisdictional customs officer shall sanction the refund on satisfying himself that the conditions referred to in para 2 above, are fulfilled.
Admittedly, the petitioner has paid the special additional duty and sought for refund of the same u/s 27 of the Customs Act, 1962 along with
interest. As the refund application was kept pending for long period of time,"" the petitioner along with similarly placed importers filed writ petitions
seeking writ of mandamus to direct refund and those writ petitions were disposed of by this Court by directing the respondents to consider the
claim for refund within eight weeks (W.P. No. 28965 of 2012, etc., dated October 19, 2012).
In so far as the present writ petition is concerned, the issue is relating to Circular No. 6/2008-Customs, dated April 28, 2008, more particularly
paragraph 4.3. The relevant portion of the said circular reads as follows:
Time-limit
4.1. In Notification No. 102/2007-Customs, dated September 14, 2007, no specific time-limit has been prescribed for filing a refund application.
Under the circumstances, a doubt has been expressed that whether the normal time-limit of six months prescribed in section 27 of the Customs
Act, would apply. In the absence of specific provision of section 27 being made applicable in the said notification, the time-limit prescribed in this
section would not be automatically applicable to refunds under the notification. Further, it was also represented that the goods imported may have
to be despatched for sale to different parts of the country and that the importer may find it difficult to dispose of the imported goods and complete
the requisite documentation within the normal period of six months. Taking into account various factors, it has been decided to permit importers to
file claims under the above exemption up to a period of one year from the date of payment of duty. Necessary change in the notification is being
made so as to incorporate a specific provision prescribing maximum time-limit of one year from the date of payment of duty, within which the
refund could be, filed by any person. It is also clarified that the importers would be entitled to refund of duties only in respect of quantities for
which the prescribed documents are made available and the claims submitted within the maximum prescribed time of one year. Unsold stocks
would not be eligible for refunds....
4.3. With the extension of time-limit and the requirement to file claims on a monthly basis, the Board feels that the number of refund claims should
be manageable for disposal within the normal period of three months. Further, in the absence of specific provision for payment of interest being
made applicable under the said notification, the payment of interest does not arise for these claims. However, the Board directs that the field
formations shall ensure disposal of all such refund claims under the said notification within the normal period not exceeding three months from the
date of receipt.
By the said circular, the Central Board of Excise and Customs, taking note of the large number of refund applications, has come to hold that
since there is no specific provision for payment of interest made applicable under Notification No. 102/2007-Customs, dated September 14,
2007, payment of interest does not arise for these claims. The Board, however, hastened to add that the applications for refund should be
disposed of promptly. It is this portion of the circular by which interest on delayed refund is denied that affects the right of the petitioner and,
therefore, they are before this court challenging paragraph 4.3 of the circular.
Mr. P.H. Arvind Pandian, learned senior counsel appearing for the petitioner contended that refund of duty or interest should be made within
one year from the date of payment of such duty or interest and that has been made but there is undue delay and hence the Department should
refund with interest consequent to delay. To buttress his argument, he referred to section 27A of the Customs Act, 1962 which provides for
interest on delayed refunds. For better appreciation of the said contention, it is relevant to refer to section 27A of the Customs Act, 1962, which
reads as follows:
27A. Interest on delayed refunds.-If any duty ordered to be refunded under sub-section (2) of section 27 to an applicant is not refunded within
three months from the date of receipt of application under sub-section (1) of that section, there shall be paid to that applicant interest at such rate,
not below five per cent. and not exceeding thirty per cent. per annum as is for the time being fixed by the Central Government by notification in the
Official Gazette, on such duty from the date immediately after the expiry of three months from the date of receipt of such application till the date of
refund of such duty:
Provided that where any duty, ordered to be refunded under subsection (2) of section 27 in respect of an application under sub-section (1) of that
section made before the date on which the Finance Bill, 1995 receives the assent of the President, is not refunded within three months from such
date, there shall be paid to the applicant interest under this section from the date immediately after three months from such date, till the date of
refund of such duty.
Explanation.-Where any order of refund is made by the Commissioner (Appeals), Appellate Tribunal, National Tax Tribunal or any court against
an order of the Assistant Commissioner of Customs or Deputy Commissioner of Customs under sub-section (2) of section 27, the order passed
by the Commissioner (Appeals), Appellate Tribunal, National Tax Tribunal or as the case may be, by the court shall be deemed to be an order
passed under that sub-section for the purposes of this section.
He further contended that if refund application is filed and no order is passed in terms of section 27(2) of the Customs Act, 1962 by the
Assistant Commissioner of Customs or Deputy Commissioner of Customs, as the case may be, then interest is payable on the duty in terms of
section 27A of the Customs Act, 1962 after expiry of three months from the date of receipt of such application till the date of refund of such duty.
However, overriding this provision, the present circular denies the payment of interest on the refund claim made stating that the exemption
notification u/s 25(1) of the Customs Act, 1962 does not provide for payment of interest.
He further contends that the grant of exemption u/s 25 of the Customs Act, 1962 is independent of payment of refund u/s 27 of the Customs
Act, 1962 and the payment of interest for delay u/s 27A of the Customs Act, 1962. Both cannot be clubbed together. Circular No. 6/2008-
Customs, dated April 28, 2008 is based on a misconception of the above provision of law.
Mr. Haja Mohideen Gisthi, learned Central Government standing counsel appearing for the respondents contends that the notification u/s 25(1)
of the Customs Act, 1962 provides for exemption from payment of special additional duty by following certain procedure. However, there is no
provision for payment of interest on refund and, therefore, the petitioner cannot seek interest on the delayed refund either.
He further contended that the payment of special additional duty and refund consequent to exemption granted u/s 25(1) of the Customs Act,
1962 is a special exemption granted to the importers under the said notification and, therefore, the refund is automatic by virtue of Notification No.
102/2007-Customs, dated September 14, 2007 and it is not a refund u/s 27 of the Customs Act, 1962 so as to claim interest u/s 27A of the
Customs Act, 1962.
This court after analysing the provisions of the Customs Act, 1962 and the Customs Tariff Act, 1975 is not inclined to accept the stand of the
respondents nor the reason given in paragraph 4.3 of Circular No. 6/2008-Customs, dated April 28/ 2008, as it is totally inconsistent with the
provisions of the Customs Act, 1962, and the Customs Tariff Act, 1975.
Section 3(5) of the Customs Tariff Act, 1975 provides for levy of additional duty to counter-balance sales tax, value added tax, local tax or
any other charges. In terms of Notification No. 102/2007-Customs, dated September 14, 2007, issued in exercise of the powers u/s 25(1) of the
Customs Act, 1962, exemption from payment of additional duty was granted on certain terms and conditions. It is not in dispute that the petitioner
has satisfied the said conditions and sought for refund of the special additional duty paid on the imported goods. As a consequence, in terms of
section 3(8) of the Customs Tariff Act, 1975, the provisions of the Customs Act, 1962 in relation to refund become applicable to refund of special
additional duty also. Sections 3(1), 3(5) and 3(8) of the Customs Tariff Act, 1975 read as under:
Levy of additional duty equal to excise duty, sales tax, local taxes and other charges.-(1) Any article which is imported into India shall, in
addition, be liable to a duty (hereafter in this section referred to as the additional duty) equal to the excise duty for the time being leviable on a like
article if produced or manufactured in India and if such excise duty on a like article is leviable at any percentage of its value, the additional duty to
which the imported article shall be so liable shall be calculated at that percentage of the value of the imported article:
Provided that in case of any alcoholic liquor for human consumption imported into India, the Central Government may, by notification in the Official
Gazette, specify the rate of additional duty having regard to the excise duty for the time being leviable on a like alcoholic liquor produced or
manufactured in different States or, if a like alcoholic liquor is not produced or manufactured in any State, then, having regard to the excise duty
which would be leviable for the time being in different States on the class or description of alcoholic liquor to which such imported alcoholic liquor
belongs.
Explanation.-In this sub-section, the expression ''the excise duty for the time being leviable on a like article if produced or manufactured in India''
means the excise duty for the time being in force which would be leviable on a like article if produced or manufactured in India or, if a like article is
not so produced or manufactured, which would be leviable on the class or description of articles to which the imported article belongs, and"" where
such duty is leviable at different rates, the highest duty...
(5) If the Central Government is satisfied that it is necessary in the public interest to levy on any imported article (whether on such article duty is
leviable under sub-section (1) or, as the case may be, subsection (3) or not) such additional duty as would counter-balance the sales tax, value
added tax, local tax or any other charges for the time being leviable on a like article on its sale, purchase or transportation in India, it may, by
notification in the Official Gazette, direct that such imported article shall, in addition, be liable to an additional duty at a rate not exceeding four per
cent. of the value of the imported article as specified in that notification.
Explanation.-In this sub-section, the expression ''sales tax, value added tax, local tax or any other charges for the time being leviable on a like
article on its sale, purchase or transportation in India'' means the sales tax, value added tax, local tax or other charges for the time being in force,
which would be leviable on a like article if sold, purchased or transported in India or, if a like article is not so sold, purchased or transported,
which would be leviable on the class or description of articles to which the imported article belongs, and where such taxes, or, as the case may be,
such charges are leviable at different rates, the highest such tax or, as the case may be, such charge...
(8) The provisions of the Customs Act, 1962 and the rules and regulations made thereunder including those relating to drawbacks, refunds and
exemption from duties shall, so far as may be, apply to the duty chargeable under this section as they apply in relation to the duties leviable under
that Act.
(emphasis supplied)
The petitioner, therefore, is justified in filing refund application in terms of section 27 of the Customs Act, 1962 and that is not in dispute.
However, no order has been passed so far and the court has already directed the respondents to process the refund application. In such a
situation, the present circular has been challenged. On going through paragraph 4.3 of the circular, it is evident that the Board is of the view that
there is no specific provision for payment of interest in Notification No. 102/2007-Customs, dated September 14, 2007. That reason is not
correct as the grant of exemption u/s 25(1) of the Customs Act, 1962 is one facet. The claim for refund is contingent on complying with the
requirement as specified in the notification. The exemption from payment of special additional duty as payable u/s 3(5) of the Customs Tariff Act,
1975 is exempted u/s 25(1) of the Customs Act, 1962. Therefore, the refund of duty paid will have to be read in terms of section 3(8) of the
Customs Tariff Act, 1975 and not otherwise. Therefore, the provision that is applicable for refund is section 27 of the Customs Act, 1962. If the
refund is not made as specified, then the consequences will follow with regard to interest.
Furthermore, the grant of exemption u/s 25(1) of the Customs Act, 1962 is an independent exercise of power by the Central Government and
certain conditions have been imposed in the said notification for seeking refund, but the procedure for refund, as has already been highlighted, will
fall u/s 27 of the Customs Act, 1962 as made applicable u/s 3(8) of the Customs Tariff Act, 1975. A conjoint reading of these two provisions
makes it clear that the refund application should be filed and entertained only u/s 27 of the Customs Act, 1962 and there is no method or manner
prescribed u/s 25 of the Customs Act, 1962 to file an application for refund of duty or interest. To state that no interest on delayed payment is
contemplated in the notification issued u/s 25 of the Customs Act, 1962 is a misconception of the provisions of the Customs Act, 1962.
When section 27 of the Customs Act, 1962 provides for refund of duty and section 27A of the Customs Act, 1962 provides for interest on
delayed refunds, the authority cannot override the said provisions by a circular and deny the right which is granted by the provisions of the
Customs Act, 1962 and the Customs Tariff Act, 1975. Therefore, paragraph 4.3 of Circular No. 6/2008-Customs, dated April 28, 2008 is
contrary to the statute and becomes totally inappropriate. When the circular is contrary to the provisions of the Customs Act, 1962 and the
Customs Tariff Act, 1975, it has to be struck down as bad. For the foregoing reasons, the writ petition is allowed and paragraph 4.3 of Circular
No. 6/2008-Customs, dated April 28, 2008 in so far as it seeks to restrict or obliterate the claim of interest on belated refunds granted in terms of
Notification No. 102/2007-Customs, dated September 14, 2007 is quashed and the pending refund application of the petitioner shall be
considered by the respondents in the light of sections 27 and 27A of the Customs Act, 1962. No costs. Consequently, M.P. No. 1 of 2013 is
closed.