The petitioner, a manufacturer involved in water management products, initially filed for a refund of Special Additional Duty (SAD) on August 4, 2014, amounting to Rs. 7,40,458. However, the application was rejected by the customs authorities. Following this, the petitioner appealed to the Commissioner (Appeals), who sided with them, ordering a reconsideration of their claim. Despite the commissioner’s intervention, the customs department repeatedly delayed the process, culminating in yet another rejection in October 2020.

After multiple remands and persistent follow-ups, including a formal grievance lodged on September 15, 2023, the customs authorities finally approved the refund in April 2024. However, they failed to grant any interest on the delayed refund, prompting the petitioner to seek judicial intervention. The crux of the dispute hinged on the interpretation of Sections 27 and 27A of the Customs Act, which govern the procedures for refund claims and interest on delayed refunds.

Under Section 27A of the Customs Act, interest on delayed refunds is mandated if the duty is not refunded within three months of receiving a complete application. The petitioner argued that their original application was complete and should have triggered the interest payment from the date of application in August 2014. Conversely, the customs authorities contended that the interest should be calculated only from November 2022, following a subsequent application for refund.

The court decisively rejected the customs department's claims, emphasizing that the petitioner’s initial application had been unchallenged for completeness. The ruling reinforced that the petitioner was entitled to interest from the original application date, as there was no valid reason for the customs to retain the funds for so long.

The court ordered the customs department to pay Rs. 4,21,940 in interest on the delayed refund within two months. Should this not be honored, the court stipulated an increase in interest to 8% per annum and noted potential accountability for responsible officials, aiming to alleviate the financial burden on taxpayers.

This case serves as a critical reminder of the importance of timely processing of refunds and the obligation of authorities to adhere to statutory guidelines. It also highlights the judicial system's role in safeguarding taxpayer rights against undue delays and arbitrary actions by administrative bodies. The ruling not only provides relief to the petitioner but also reinforces the need for transparency and accountability in government dealings.