Orient Enterprises vs Union of India

M.C. Jain, C.J.—Rule D.B.

The petitioner imported certain items and clearance of the same was sought against three bills of entry. However, after show cause notice was issued and proceedings were initiated, an order was passed against the petitioner, the petitioner deposited the duty, redemption fine and personal penalty on 29-8-1979. The Collector of Customs gave an option to release the goods on payment of Rs. 8 lacs and in addition imposed a penalty of Rs. 2 lacs. By the adjudication order, it was directed that the duty be assessed at US $ 530 per MT c.i.f. as against the tendered value of US $ 360 per MT. The difference in duty in these circumstances came to Rs. 35,000. The full redemption fine and penalty as well as difference in duty was deposited on 29th August, 1979. The petitioner preferred an appeal against the order of adjudication and the appeal came to be ultimately heard by the Central Board of Excise and Customs, New Delhi, which decided the same vide its order dated 29th February, 1980 and thereafter, the petitioner preferred a revision application before the Central Government which on account of change in law, was transferred to the Tribunal and the revision was treated as an appeal. By order dated 14-8-1985, the appeal was allowed and the orders of the Customs authorities below were set aside. It was also directed that the petitioners would be given consequential relief in compliance with the order of the Tribunal. The petitioners'' case further is that the petitioners served notices for the refund of the amount and ultimately a legal notice through Counsel was also served in April, 1986 but the amount was not refunded. The petitioners also approached the Tribunal in June, 1986 for issuance of necessary directions to the Collector of Customs, Cochin to pay the amount. The Tribunal ultimately ordered on 8th May, 1987 that the amount be refunded within 60 days and that the Collector shall report back by 15th July, 1987. The order of the Tribunal even was not complied with. Ultimately on 29th August, 1987, the amount of Rs. 10,35,000 was paid back to the petitioners. By this writ petition, the petitioner seeks a direction to respondents 1 and 3 to pay interest to the petitioner at the rate of 12 per cent per annum on the amount illegally retained without the authority of law from the date of deposit till the date of repayment i.e. 29th August, 1987.

Mr. G. L. Rawal, learned counsel for the petitioners submitted that the petitioners have been deprived of the use of their money and so, the petitioners are entitled to interest from the date of deposit till the date of repayment. The retention of money under the adjudication order was without authority of law. In exercise of the equitable jurisdiction of this court, the petitioners should be compensated by payment of interest for the period for which the petitioners have been deprived of the use of their money and the respondents 1 and 3 enjoyed the benefit thereof by illegally retaining the petitioners'' money.

Learned counsel supported his contention by placing reliance on Calcutta Paper Mills Manufacturing Co. Vs. Customs, Excise and Gold (Control) Appellate Tribunal and Others, wherein it has been observed that if the Excise Authorities have collected any amount as tax without authority of law, it is just and proper that they should pay interest at the rate of 12% per annum from the date of collection of the said amount till the date of actual payment.

Reliance has also been placed on Vijay Textile, A Partnership Firm at Plot No 4, Nerol Abendaly Vs. Union of India, Jyoti Limited Baroda Vs. Union of India and Another, and Dulichand Shreelal Vs. Collector of Central Excise and Others, In this case, in para 51, the learned Judge observed that the collection made by the respondents is unauthorised. Interest is the return or compensation for the use or retention of another''s money. The respondents have retained and enjoyed the benefit of such money so long. Accordingly, the petitioner is entitled to interest.

Reference has also been made to Neeraj Newspapers Association (P) Ltd. Vs. Assistant Collector of Customs, Air Cargo Complex (Import) and Others, In this case, it has been observed that there is no specific provision under the Customs Act unlike the Income Tax Act for payment of interest on the belated refund but if the refund is due to the petitioner which has been illegally withheld, the assessed is entitled to interest as he has been deprived of the use of the money. Interest is the compensation for the loss a person suffers because of deprivation of the money which he is otherwise entitled to have. Since the respondents have retained and enjoyed the benefit of such money so long, they have to pay interest. It was ordered that the petitioner shall be entitled to interest from the date of Appellate Collector''s order till the date of payment.

A Single Bench decision of this court has also been cited, in re : Redihot Electricals Vs. Union of India and Others, The learned Judge placed reliance on Vijay Textile, A Partnership Firm at Plot No 4, Nerol Abendaly Vs. Union of India, and Jyoti Limited Baroda Vs. Union of India and Another, and also on Calcutta Paper Mills Manufacturing Co. Vs. Customs, Excise and Gold (Control) Appellate Tribunal and Others, and ordered that it would be just and proper that the respondents should pay interest at the rate of 12% p.a. from the date of the collection of the amount till the date of actual payment.

Mr. Madan Lokur, learned counsel for the respondents submitted that the Customs Authorities exercised quasi-judicial functions while adjudicating matters arising under the Customs Act. The view taken by the authority may be upheld or reserved by the Tribunal and the view of the Tribunal is also liable to be reversed or even upheld in the superior courts. When the authority exercised quasi-judicial functions, then in that situation, the Department should not be made liable to pay interest from the date of deposit. The Department should be made liable to pay interest only when ultimately refund is ordered when the amount is not refunded despite order of refund. The general principle that interest should be awarded as a matter of course from the date of deposit by way of return or compensation would not be reasonable having regard to the nature of functions exercised by the customs authorities under a Statute. There is a bona fide exercise of power by the authorities. Although ultimately if no duty is levied or no penalty is levied, then the Department is liable under law to make refund of the amount deposited by the parties. Mr. Lokur also submitted that there is no obligation of the Department to make payment of interest under the statute. While invoking the equitable jurisdiction of this court, the court will have regard to the conduct of the parties as well as the facts and circumstances of each individual case and the court may even go into the question as to whether the exercise of quasi-judicial power by the authority was a bona fide exercise of authority or not. Mr. Lokur referred to the decision of the Supreme Court which has been discussed by the learned Judge of this Court in Redihot Electricals (supra). It may be stated that in Seth Thawardas Pherumal Vs. The Union of India (UOI), , their Lordships held that the Interest Act applies where interest is not otherwise payable by law and the conditions which required to be fulfilled were considered by their Lordships. Interest can be awarded under the aforesaid Act. It was also observed that the court cannot allow interest simply because it thought that the demand was reasonable. Another authority of the Supreme Court relied upon by Mr. Lokur is India Cements Ltd. Vs. Collector of Central Excise, . In the appeal before their Lordships, as to whether the appellant is entitled to the refund of Rs. 22,43,002.09 paid as excise duty on price of packing materials, while allowing the appeal, the order of the Tribunal and of other authorities were set aside and it was declared that the appellant is entitled to refund of the amount and he shall be paid interest at the rate of six per cent from the date of refusal of refund.

Reliance has also been placed on a decision of the Bombay High Court in Kaira Dist. Co-op. Milk Producers Union Ltd. Vs. U.O.I., The Court directed the payment of interest at the rate of 12 per cent per annum from the date when the petitioners had filed an application for reassessment of the product and for refund of the excess amount recovered by the Customs authorities by treating the product as one falling under Tariff Item 21(2), till payment.

We have considered the rival submissions of the learned counsel for the parties. It would appear from the case law referred to above that there is no rigid or inflexible rule that the interest may be allowed to be paid from the date of deposit till the date of repayment. The conduct of the parties can be looked into and the facts and circumstances of each individual case also in our opinion have a bearing on the question of award of interest while exercising the extraordinary equitable jurisdiction under Article 226. So far as the facts of the present case are concerned, the petitioners were required to deposit the amount under an adjudication order and they continued to agitate against the levy of duty and penalty imposed on them in the first appeal and before the Tribunal. It is in the year 1985 they obtained order in their favor and even thereafter the amount was not refunded to the petitioners and the petitioners had to approach the Tribunal. It was only on 29-8-1987 after almost 2 years of the order of the Tribunal, the petitioners were paid back the amount deposited by them. From the averments made in the petition, it would appear that after the decision by the Tribunal, demands were made by the petitioners and ultimately they had to serve legal notice as well. The petitioners had taken up the matter regarding refund of the amount after they obtained the order of the Tribunal in their favor but the payment was not made. In the facts and circumstances of the case, we are inclined to award interest to the petitioner from the date of filing of the revision application before the Central Government which was treated as appeal by the Tribunal, till the date of repayment. It was really a demand for refund which was allowed.

Accordingly, we allow this writ petition and direct the respondents 1 and 3 to pay interest on Rs. 10,35,000 from the date of filing of the revision application before the Central Government till the date of payment at the rate of 12% p.a.

No orders as to costs.