ORDER
T.K. Jayaraman, Member (T)
1. This is an appeal filed against the Order-in-Appeal No. 38/2004-Cus., dated 18-3-2004, passed by the Commissioner of Customs (Appeals), Bangalore.
2. The appellants filed a refund claim application during the period 1986-1989 on the ground that the mining equipment imported were entitled for the benefit of Notification No. 13/81 applicable to EOU and the same was denied to them. The appellants were not successful before the lower authorities in getting the refund. However, the Tribunal issued a favourable order on 12-10-2000. Consequent to the Tribunal’s order refund was sanctioned on 20-8-2002. The appellants claimed interest under Section 27A as the refund was finally granted beyond the statutory time limit. The Commissioner (Appeals), in the impugned order, while granting the request of the appellants for grant of interest observed that interest is payable on expiry of three months from the date of Tribunal’s order. The appellants actually claimed interest for the period from 26-8-1995 to 20-8-2002 (date of refund). This is the point of dispute. Hence the appellants have come before the Tribunal for relief.
3. Smt. Komala Choudhury, learned Consultant appeared for the appellants and Shri R. K. Singla, Jt. CDR appeared for the Revenue.
4. The learned Consultant explained the legal position under Section 27A of the Customs Act, 1962 and urged that the appellants are entitled for interest from 26-8-1995 to 20-8-2002.
5. The learned Jt. CDR fairly conceded the legal position.
6. We have gone through the records of the case carefully. Under Customs Act, 1962, Section 27 relates to claim for refund of duty. Section 27(2) provides for issuing refund order by the Assistant Commissioner or Deputy Commissioner when he is satisfied that the applicant is entitled for the refund. The refund should be granted normally within a period of three months from the date of the refund claim. There used to be enormous delay by the Departmental Officers in granting refund amount. Therefore, for the first time in the year 1995, Section 27A was introduced in the Customs Act providing for grant of interest on delayed refunds. This Section makes it clear that if the refund is not granted within three months from the date of receipt of refund application, interest should be paid from the date immediately after the expiry of three months from the date of refund claim till the date of refund. It should be borne in mind that Section 27A was enacted on 26-5-1995. In the present case, the refund applications were filed during the period from 1986-1989. In other words, the refund claim were filed prior to enactment of Section 27A. For such cases, proviso to Section 27A will be made applicable. According to the proviso, where the refund claims had been filed prior to the enactment of Section 27A (i.e. 26-5-1995), the period of interest starts from the date of expiry of three months from 26-5-1995. Therefore in the present appeal, the interest would start from 26-8-1995. Since refund was granted on 20-8-2002, interest is payable for the period from 26-8-1995 to 20-8-2002. The Commissioner (Appeals) has held in the impugned order that the interest starts after the expiry of three months from the date of Tribunal’s order. This interpretation is incorrect in view of the Explanation to Section 27A. According to the said Explanation, if an order of refund is made consequent to the Appellate Tribunal’s order against an order of the Assistant Commissioner or the Deputy Commissioner under Sub-section (2) of Section 27, that refund order would be deemed to be an order passed under that sub-section for the purposes of Section 27A. This explanation enables us clearly to decide the date from which the interest liability of revenue starts in case of delayed refund. In the present case, even though the date of Tribunal’s order is 12-10-2000, and the actual refund was given on 20-8-2002, the order of refund dated 20-8-2002 will be deemed to be an order passed under Section 27(2) of the Customs Act. When the order passed under Section 27(2) is delayed beyond three months from the date of claim interest liability starts. Since in the present case, the refund claims were made prior to the enactment of Section 27A, proviso to Section 27A comes into play. We have already explained that in this cases the interest liability should start after the expiry of three months from the date of enactment of Section 27A, i.e. 26-8-1995 as Section 27A received the assent of the President on 26-5-1995. Section 27A is reproduced below in order to clearly understand our findings:
SECTION 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 Sub-section (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 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 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.
In view of the above discussions, the Commissioner (Appeals) is clearly wrong in holding the interest liability starts on expiry of three months from the date of Tribunal’s order. We set aside the impugned order and allow the appeal by holding that the interest is payable for the period from 26-8-1995 to 20-8-2002.
(Operative portion of the order has been pronounced in the Court on completion of hearing)