Customs Dept Can’t Retain Assessee’s Money for Years Without Paying Interest: Delhi High Court

The Delhi High Court has held that customs dept cannot retain assessee’s money for years without paying interest. The bench of Justice Prathiba M. Singh and Justice Shail Jain has observed that the excess customs duty was retained by the Department for several years—ranging from 2 years in some cases to nearly 8–9 years in others. Importantly, this delay was not attributable to the importers but stemmed from failure of the EDI system to reflect applicable concessional duty notifications. Administrative inaction in reassessing Bills of Entry despite repeated representations. Prolonged adjudication and appellate proceedings The bench emphasized that the government effectively had the benefit of using the taxpayer’s money without any legal entitlement, which cannot be permitted. The petitions were filed by several companies, including Jaina Marketing & Associates, Lava International Ltd., Intex Technologies (India) Ltd., and U.T. Electronics Pvt. Ltd.. These companies had imported mobile phones and related components between 2014 and 2015 and paid customs duties at higher rates due to technical and procedural limitations in the Electronic Data Interchange (EDI) system. Despite being eligible for concessional duty rates under relevant exemption notifications, the importers were unable to avail such benefits at the time of import. In several instances, the system did not permit selection of the lower rate, forcing companies to pay higher duties under protest. Following litigation and reassessment proceedings, the Customs Department eventually allowed substantial refunds. For instance, Lava International alone received refunds exceeding ₹127 crore across multiple orders, while Jaina Marketing & Associates secured cumulative refunds exceeding ₹145 crore. However, in all cases, the authorities denied interest on these refunds. The petitioners challenged this denial, arguing that the government had retained their funds for years—sometimes nearly a decade—without justification, and that such retention warranted payment of statutory interest. At the heart of the dispute was the interpretation of provisions under the Customs Act, 1962, particularly regarding when interest becomes payable on refunds. The petitioners contended that the delay in granting refunds was attributable to systemic failures and administrative inaction. Their initial appeals against Bills of Entry should be treated as refund applications for the purpose of calculating interest. The government cannot unjustly benefit from holding taxpayers’ money without compensation. The Customs Department maintained that interest is only payable under specific statutory conditions and timelines, which were not triggered in these cases. A notable aspect highlighted in the case was the failure of the EDI system to incorporate applicable exemption notifications in time. Even after judicial clarity emerged from earlier rulings, including the Supreme Court’s decision in the SRF Ltd. v. Commissioner of Customs, the system remained outdated, preventing importers from claiming rightful benefits. Further, reassessment of Bills of Entry—initiated as early as 2015—was only completed in 2022 in some cases, significantly delaying the refund process. The Court noted that such delays could not be attributed to the petitioners, who had been consistently pursuing their claims. The companies argued that duties were paid under protest due to system constraints. They had actively pursued reassessment and refund claims over several years. The prolonged retention of funds by the Customs Department amounted to unjust enrichment by the state. They emphasized that interest should be granted from the date of initial payment or at least from the date of filing appeals, which effectively sought refund relief. The Court underscored that interest on delayed refunds is not a discretionary benefit or windfall, but a form of compensation that compensates for the time value of money lost by the taxpayer. It ensures that the State does not gain from its own delay or inefficiency. It acts as a deterrent against administrative lethargy In essence, denying interest would amount to allowing the State to unjustly enrich itself at the expense of the taxpayer. Case Details Case Title: Jaina Marketing And Associates Versus Union Of India And Ors Citation: JURISHOUR-574-HC-2026(DEL) Case No.: W.P.(C) 1225/2024 Date: 30th March, 2026 Counsel For Petitioner: Asha Jain Madan Counsel For Respondent: Anushree Narain Click Here To Read Order Read More: Madras HC Orders Issuance Of Fresh Yearwise SCN Instead Of Consolidation

Customs Dept Can’t Retain Assessee’s Money for Years Without Paying Interest: Delhi High Court

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