CESTAT Upholds 6% Interest on Delayed Customs Refund, Rejects Claim for Higher Rate Despite 8 Year Delay

The Delhi Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has upheld the grant of interest at 6% per annum on a delayed customs refund, rejecting the importer’s plea for a higher 12% interest, even though the refund was delayed for nearly eight years due to departmental inaction. The bench of Dr. Rachna Gupta (Judicial Member) has stated that the Tribunal, being a creature of statute, is bound by the statutory mandate and does not possess inherent powers to award interest beyond what is prescribed. The case traces its origin to a 2005 investigation by Customs authorities, which alleged that the appellant had wilfully mis-declared the Maximum Retail Price (MRP) of imported goods to evade customs duty. A show cause notice was issued in July 2005, and the demand was confirmed by an Order-in-Original in April 2009. During the pendency of appellate proceedings, the appellant deposited a total amount of Rs. 41.93 lakh between 2005 and 2010, including ₹35 lakh as pre-deposit, pursuant to directions of the Delhi High Court. In August 2015, CESTAT set aside the original demand and remanded the matter for recomputation limited to goods sold to NCCF/Kendriya Bhandar. The department’s appeal against this order was dismissed. Despite repeated representations by the appellant, the Customs department failed to comply with the remand directions for over eight years. Ultimately, the appellant invoked Rule 41 of the CESTAT Procedure Rules, 1982, seeking directions for compliance. Only in March 2021 did the department recompute the demand. Thereafter, in August 2023, the appellant sought a refund of the excess amount. A refund of ₹30.73 lakh was sanctioned in May 2024, but without interest. On appeal, the Commissioner (Appeals) granted interest from the date of deposit till the date of refund, but restricted the rate to 6% per annum, prompting the present appeal before the Tribunal. The central issue before CESTAT was Whether the pre-deposit made during appellate proceedings, after appropriation of confirmed dues, should be refunded with interest at 12% per annum instead of 6%. The appellant argued that the prolonged and unexplained delay on the part of the department warranted compensatory interest at 12%, relying on earlier Tribunal decisions including Bird Audio Electronics, Parle Agro Pvt. Ltd., and Design Dialogues India Pvt. Ltd. It was contended that the amount deposited was a pre-deposit, and therefore, statutory limits under Section 11BB should not restrict the Tribunal from awarding a higher rate of interest. Rejecting these submissions, the Tribunal held that the interest rate on refunds is statutorily governed by notifications issued under Section 11BB of the Central Excise Act, which applies to Customs through pari materia provisions. Notification No. 70/2014-Cus. specifically prescribes 6% per annum as the applicable rate. Once the deposit is linked to customs duty liability, the statutory framework mandates the applicable interest rate, leaving no discretion to award a higher rate. The Tribunal relied on decisions of the Madras High Court and Delhi High Court, which consistently held that statutory notifications override equitable considerations, even where delay is attributable to the department. It further distinguished the decisions relied upon by the appellant, noting that either the relevant notification was not considered in those cases or the factual matrix was materially different. CESTAT upheld the order of the Commissioner (Appeals) and dismissed the appeal, confirming that the appellant is entitled to interest at 6% per annum only, from the date of deposit till the date of refund. Case Details Case Title: M/s. Savi Vision Pvt. Ltd. Versus Commissioner of Customs (Preventive) Case No.: Customs Appeal No. 51596 of 2025 Date: 29.01.2026 Counsel For Appellant: Parth Mullick, Advocate Counsel For Respondent: Anand Narayan, Authorized Representative Click Here To Read Order Read More: CESTAT Rejects Customs’ Bid to Treat Imported Nutraceutical Ingredients as ‘Edible Preparations’, Quashes Rs. 7.07 Crore Duty Demand

CESTAT Upholds 6% Interest on Delayed Customs Refund, Rejects Claim for Higher Rate Despite 8 Year Delay

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