The Customs, Excise and Service Tax Appellate Tribunal, Kolkata, in cross-appeals arising from a protracted customs refund dispute, has held that interest on delayed refund accrues from the expiry of three months after the refund application date, not from the re-assessment order date, and enhanced the interest rate from 6% to 12% per annum. The decision reinforces the principle that revenue procrastination cannot prejudice the importer's statutory entitlement to compensation for delayed refunds.
Background & Facts
The Dispute
M/s Atcorp Global Pvt. Ltd. (the importer) imported 3,521.74 metric tonnes of yellow/green peas under five Bills of Entry between December 2017 and February 2018. The importer initially cleared the goods paying 50% basic customs duty (BCD), but subsequently discovered that the goods qualified for NIL rate of customs duty under Notification No. 93/2017-Cus dated 21.12.2017. The importer sought re-assessment under Section 149 of the Customs Act, 1962 and, when that remained unaddressed, filed a refund claim under Section 27. The revenue delayed re-assessment for nearly seven years, during which the classification issue was litigated up to the Supreme Court. The refund of Rs. 2,89,56,399 was finally sanctioned without interest. The Commissioner (Appeals) allowed interest at 6% from 20.02.2019 (three months after the refund application). The importer appealed seeking 12% interest; the revenue cross-appealed contending interest should run only from the re-assessment order date (17.09.2025).
Key Facts
- Import period: Five Bills of Entry filed between 21.12.2017 and 16.02.2018 for yellow/green peas
- Excess duty paid: Total excess BCD of Rs. 2,89,56,399 paid under mistake (50% BCD instead of NIL)
- Re-assessment request: Filed under Section 149 on 18.09.2018 (Sevottam Receipt No. 0015211) - not acted upon
- First refund application: Filed under Section 27 on 19.11.2018 (Sevottam Receipt No. 0017538)
- Refund application rejected: 11.01.2019 on ground that Bills of Entry were finally assessed
- Appeal under Section 128: Filed February 2019; rejected by Order-in-Appeal dated 02.04.2019
- Reminder for re-assessment: Submitted 28.09.2020 - not acted upon
- CESTAT Final Order on identical issue: No. 777256-777262/2023 dated 12.10.2023 (decided in favour of importers)
- Department accepted CESTAT order: 27.03.2024 with Chief Commissioner concurrence
- Further reminders: 22.04.2024 (rejected 05.05.2024); appeal filed June 2024; allowed 06.09.2024
- Department filed SLP in Supreme Court: 26.03.2025 against already-accepted CESTAT order
- Supreme Court disposed of SLP: 09.05.2025 on merit and time-barred grounds
- Re-assessment order (Order-in-Original): Passed 17.09.2025; corrigendum 28.10.2025
- Bills of Entry reassessed in ICES: 04.11.2025
- Fresh refund application: 07.11.2025 (ARN IG07112025132200007)
- Refund order sanctioning principal: 01.12.2025 (Refund Order No. 193/2025) - Rs. 2,89,56,399 without interest
- Refund credited to account: 20.01.2026
- Appeal for interest: Filed 11.02.2026 under Section 128
- Order-in-Appeal (impugned): 07.04.2026 allowed interest @6% from 20.02.2019 (three months post 19.11.2018 application)
- Present appeals filed: 14.05.2026 (importer) and cross-appeal by revenue
Procedural History
- 18.09.2018: Re-assessment application under Section 149 filed
- 19.11.2018: Refund application under Section 27 filed
- 11.01.2019: Refund application rejected
- February 2019: Appeal under Section 128 filed
- 02.04.2019: Order-in-Appeal rejected appeal
- 28.09.2020: Reminder for re-assessment submitted
- 12.10.2023: CESTAT Final Order on identical issue (No. 777256-777262/2023)
- 27.03.2024: Department accepted CESTAT order
- 22.04.2024: Reminder for re-assessment submitted
- 05.05.2024: Re-assessment application rejected
- June 2024: Appeal under Section 128 filed
- 06.09.2024: Order-in-Appeal allowed appeal for re-assessment
- 26.03.2025: Department filed SLP in Supreme Court
- 09.05.2025: Supreme Court disposed of SLP
- 17.09.2025: Order-in-Original passed allowing re-assessment
- 28.10.2025: Corrigendum issued
- 04.11.2025: Bills of Entry reassessed
- 07.11.2025: Fresh refund application filed
- 01.12.2025: Refund Order No. 193/2025 issued (principal only)
- 20.01.2026: Refund amount credited
- 11.02.2026: Appeal for interest filed
- 07.04.2026: Impugned Order-in-Appeal allowing interest @6% from 20.02.2019
- 14.05.2026: Cross-appeals filed before CESTAT
- 22.07.2026: Hearing before CESTAT
- 18.08.2026: Judgment pronounced
Relief Sought
The importer-appellant sought enhancement of interest from 6% to 12% per annum, calculated from the date of payment of duty or from the first Section 149 application (18.09.2018). The revenue-appellant sought restriction of interest to the period after three months from the re-assessment order (17.09.2025), and maintenance of the 6% rate.
The Legal Issue
The Tribunal had to resolve two discrete questions: (1) Whether interest on delayed refund under Section 27 of the Customs Act accrues from the expiry of three months from the date of receipt of the refund application (19.11.2018), or from the date of the re-assessment order (17.09.2025); and (2) Whether the applicable rate of interest is 6% (as notified under Section 129EE) or 12% (as per judicial precedent for pre-deposit refunds where no statutory rate governs).
Arguments Presented
For the Appellant (Importer)
The importer contended that the refund claim filed on 19.11.2018 was valid and the revenue's inaction for years constituted procrastination. Relying on Ranbaxy Laboratories Ltd. v. Union of India (2012) and Union of India v. Hamdard (Waqf) Laboratories (2017), the importer argued that interest liability commences from three months after receipt of the refund application, not from the refund order date. On the rate, the importer cited Rajendra Kumar Jain v. Commissioner of Customs (Port), Kolkata (Calcutta HC, 09.05.2024), Commissioner of Central Excise, Panchkula v. Riba Textiles Ltd. (Punjab & Haryana HC), Principal CGST v. Green Valley Industries Pvt. Ltd. (Meghalaya HC), and Parle Agro Pvt. Ltd. v. Commissioner, CGST, Noida (CESTAT All India), all holding 12% interest payable on refund of amounts deposited during investigation/adjudication where no statutory rate applies. The importer also relied on the Kolkata Bench decision in Berger Paints India Ltd. v. CC (Final Order No. 75927/2026) which followed the Calcutta HC's Rajendra Kumar Jain ruling.
For the Respondent (Revenue)
The revenue argued that since re-assessment occurred only on 17.09.2025, interest could only run from three months thereafter. It contended that the 6% rate notified under Section 129EE of the Customs Act (Notification No. 70/2014-Cus(NT) dated 12.08.2014) governs. The revenue further submitted that the Commissioner (Appeals) erred in allowing interest from 20.02.2019 when the refund claim was premature pending re-assessment.
The Court's Analysis
The Tribunal first addressed the commencement date for interest. It surveyed the Supreme Court's ratio in Ranbaxy Laboratories and Hamdard (Waqf) Laboratories, both interpreting Section 11BB of the Central Excise Act, 1944 (pari materia with customs provisions). In Ranbaxy, the Court held: "the liability of the revenue to pay interest under Section 11BB of the Act commences from the date of expiry of three months from the date of receipt of application for refund under Section 11B(1) of the Act and not on the expiry of the said period from the date on which order of refund is made." The Hamdard Court affirmed this principle, stating it is "obligatory on the part of the Revenue to intimate the assessee to remove the deficiencies in the application within two days... The adjudicatory process by no stretch of imagination can be carried on beyond three months."
"The principle laid down in Ranbaxy Laboratories Limited (supra) would apply on all fours to the case at hand. It is obligatory on the part of the Revenue to intimate the assessee to remove the deficiencies in the application within two days and, in any if there are still deficiencies, it can proceed with adjudication and reject the application for refund. The adjudicatory process by no stretch of imagination can be carried on beyond three months. It is required to be concluded within three months."
Applying this to the facts, the Tribunal found the refund application of 19.11.2018 was valid and the revenue's failure to act for years - despite the classification issue being settled by CESTAT in 2023 and the Supreme Court in 2025 - constituted inexcusable delay. The Commissioner (Appeals) correctly allowed interest from 20.02.2019 (three months post 19.11.2018). The revenue's appeal was dismissed.
On the rate of interest, the Tribunal examined the Calcutta HC's Rajendra Kumar Jain decision (09.05.2024), which held: "there is no statutory provision available at present fixing the rate of interest for the refund of the amount deposited during investigations. Till such time a statutory provision granting interest is notified in law, interest @12% is payable." The HC distinguished the Section 129EE notification (6%) as applicable only from its date (12.08.2014) and only for pre-deposits under that provision. The Tribunal noted the jurisdictional HC's decision is binding under the Collector of Central Excise v. Kashmir Conductors (Larger Bench) principle. It also relied on Riba Textiles, Green Valley Industries, Parle Agro, and its own Berger Paints decision - all awarding 12%.
"We find that to the factual matrix of the present case of the appellant-importer, the above discussed case laws would be squarely applicable. Accordingly, we hold that they would be eligible for interest @ 12% as against the interest of 6% already granted by the Adjudicating authority."
The Tribunal concluded that the importer is entitled to 12% interest for the period 20.02.2019 to date of refund (20.01.2026), and the revenue must pay the balance 6% within eight weeks.
The Verdict
The importer-appellant succeeded in part; the revenue-appellant failed. The Tribunal dismissed the revenue's appeal (Customs Appeal No. 75647/2026), upholding interest commencement from 20.02.2019. It allowed the importer's appeal (Customs Appeal No. 75641/2026), enhancing the interest rate from 6% to 12% per annum for the period 20.02.2019 to 20.01.2026. The revenue was directed to pay the differential 6% interest (12% minus 6% already paid) on Rs. 2,89,56,399 within eight weeks from communication of the order. The refund of Rs. 11,72,377 already sanctioned at 6% (Order No. 178/2026 dated 13.07.2026) stands; the balance 6% is additionally payable.
What This Means For Similar Cases
Refund Application Date Triggers Interest, Not Re-Assessment Order
The judgment reaffirms that once a valid refund application is filed under Section 27, the revenue cannot defer interest liability by delaying re-assessment or adjudication. The three-month clock starts from receipt of the refund application, irrespective of whether the underlying duty liability has been formally re-determined. Practitioners should:
- File refund claims promptly under Section 27 even while Section 149 re-assessment is pending
- Preserve evidence of filing dates (Sevottam receipts, ARN numbers)
- Argue that Ranbaxy and Hamdard principles apply squarely to customs refunds
Jurisdictional High Court Precedent Binds Tribunal on Interest Rate
Where the jurisdictional High Court has ruled on the interest rate for refunds of pre-deposits or amounts paid during investigation (here, Calcutta HC in Rajendra Kumar Jain mandating 12%), the Tribunal must follow it, notwithstanding conflicting views from other High Courts or a 6% statutory notification that post-dates the period in question. Key takeaways:
- Identify the jurisdictional HC ruling on point; it is binding on the Tribunal
- The Section 129EE 6% notification (12.08.2014) applies only prospectively and only to pre-deposits under that section
- For refunds of duty paid under protest or mistake before statutory rate notification, 12% remains the default judicial rate
Revenue Procrastination Does Not Extinguish Interest Entitlement
The Tribunal's factual chronology - seven years from refund application to re-assessment, with the department appealing an already-accepted CESTAT order to the Supreme Court - underscores that institutional delay will not defeat the assessee's compensatory interest claim. Lawyers should:
- Document every instance of revenue inaction (reminders, unanswered letters, pending appeals)
- Highlight finality of favourable Tribunal/HC orders that the revenue failed to implement
- Seek costs and penal interest where delay is egregious (as contemplated in Sandvik Asia)
