Court’s Decision
The Division Bench of the Kerala High Court comprising Dr. Justice A.K. Jayasankaran Nambiar and Justice P.M. Manoj dismissed Writ Appeal No. 1868 of 2017 filed by the Union of India, holding that the appeal was not maintainable. The Union had challenged the Single Judge’s judgment directing payment of 12% interest on delayed refund of pre-deposit amount under customs law. The Court ruled:
“This being less than the threshold amount prescribed by the Central Board of Indirect Taxes for the pursuit of appeals before the High Court, we are of the view that the Writ Appeal preferred by the revenue seeking the relief of confining the interest to 6% cannot be maintained.”
Accordingly, the writ appeal was dismissed and the appellants were directed to disburse the differential interest amount within three months.
Facts
- The assessee had paid ₹1,15,15,204 as a pre-deposit for filing an appeal against a differential duty demand issued due to cancellation of an EPCG licence.
- After a favourable decision from the Appellate Tribunal, the High Court directed the refund of the pre-deposit.
- The Department refunded the amount but did not pay interest.
- The assessee filed a writ petition seeking interest for the delayed refund.
- The Single Judge allowed the writ petition, directing interest at 12% per annum from the expiry of three months after the appellate order until actual refund.
Issues
- Whether the writ appeal filed by the Union of India was maintainable in light of the monetary threshold prescribed by the Central Board of Indirect Taxes (CBIC).
- Whether the interest on delayed refund of pre-deposit should be limited to 6% as per Customs Act notifications, or 12% as awarded by the Single Judge.
Petitioner’s Arguments (Union of India)
- The Union contended that interest should be confined to 6% as per relevant statutory notifications under the Customs Act.
- They submitted that they had already paid 6% interest and were aggrieved by the award of an additional 6% (totaling ₹93,58,557).
- The appeal was preferred only to challenge this enhanced rate of interest.
Respondent’s Arguments (Assessee)
- The respondent relied on Supreme Court decisions recognising the right to interest on delayed refunds of pre-deposit.
- They contended that the Single Judge correctly applied the legal principle entitling refund with 12% interest.
- It was pointed out that the disputed amount (₹93.58 lakhs) was below the threshold set by the CBIC for preferring writ appeals.
Analysis of the Law
- The Court considered the administrative thresholds fixed by the CBIC for pursuing appeals before High Courts.
- It reiterated the legal principle that where monetary limits for filing appeals are prescribed for efficiency and to avoid multiplicity of litigation, such limits are binding unless exceptional circumstances are shown.
- The Court found that no such exception existed in the present case.
Precedent Analysis
- Though specific Supreme Court judgments are mentioned as being relied upon by the Single Judge, the Division Bench did not delve into them again since the appeal was dismissed on the ground of maintainability due to monetary limits.
- The legal principle laid down by the Supreme Court regarding entitlement to interest on delayed refunds was implicitly upheld.
Court’s Reasoning
- The Bench noted that the only issue in the writ appeal was regarding the rate of interest (6% already paid vs. 12% awarded), and the disputed additional amount was ₹93.58 lakhs.
- It observed:
“This being less than the threshold amount prescribed… we are of the view that the Writ Appeal… cannot be maintained.”
- The emphasis was placed on adherence to CBIC’s monetary threshold instructions which restrict appeals below certain financial limits unless exceptional questions of law are involved.
Conclusion
The Kerala High Court dismissed the writ appeal for lack of maintainability, reiterating that the monetary limit for appeal set by CBIC must be respected. The Court directed the Union of India to release the balance amount of ₹93.58 lakhs within three months from receipt of a copy of the judgment.
Implications
- Reinforces the principle that internal monetary thresholds set by tax authorities are binding for litigation strategy.
- Confirms that interest at 12% may be awarded for delayed refunds of pre-deposit when justified under legal precedent.
- Promotes finality in tax disputes by curbing unnecessary appeals involving relatively lower amounts.