ESSAR STEEL LTD. AND ANR. versus UNION OF INDIA AND ORS.

Citation: [2007] 4 S.C.R. 540 · Decided: 29-03-2007 · Supreme Court of India · Bench: S.H. KAPADIA · Disposal: Disposed off

Judgment (excerpt)

A 
ESSAR STEEL LTD. AND ANR. 
' 
-... 
v. 
UNION OF INDIA AND ORS. 
, 
MARCH 29, 2007 
B 
[S.H. KAPADIA AND B. SUDERSHAN REDDY, JJ.] 
Import-Export: 
... 
~ ---
Project Imports Regulations, 1986-lmporter submitted Bills of Entry-
c Provisional assessment-Department increased assessable value by DM 37.40 
million-On that basis, importer paid additional duty of Rs. 6.02 crores-
Payment under protest-Tribunal directed refund-Department filed appeal 
before .this Court, which by interim order, declined stay of the refund, 
upholding entitlement of importer to refund subject to furnishing of bank 
D guarantee-Further held that if Department succeeded in the appeal, amount 
of refund shall be restituted back to it by importer together with interest 
thereon @ 18% p.a. from date of refund-Civil appeal disposed of with the 
"'" 
Court setting aside addition in assessable value to the extent of DM 23 
,..._ 
million-Held: Department failed in its appeal in increasing the assessable 
value by DM 37.40 million-In the circumstances, claim by Department 
E under the interim order for grant of interest on Rs.6.02 crores @ 18% p.a. 
from 28-10-1991 (the date of refund) to 10-7-1997 (the date Department 
recovered Rs. 6.02 crores by encashing bank guarantee given by importer) 
is not tenable. 
F 
Importer-Appellant submitted Bills of Entry on which provisional 
assessment was made under the Project Imports Regulations, 1986. The 
A 
declared assessable value of DM 46. 75 million was not accepted by the 
-¥ 
Department which increased the value by DM 84.15 million, on account of 
which, Appellant paid a further Rs.6.02 crores as duty, though under protest 
On payment, the imported goods were cleared. Tribunal, however, held in favour 
G of the Appellant by directing refund of Rs.6.02 crores. Department ftled appeal 
before this Court which, by an interim order dated 9-9-1991, declined to order 
.... 
stay of the refunds. The Court upheld entitlement of Appellant to refund subject 
to furnishing of a bank guarantee by it and further held that if the Department 
succeeded in the appeal, the amount of refund shall be restituted back to it by 
-~" 
the Appellant together with interest thereon@ 18% p.a. from the date of 
~ 
H 
540 
ESSAR STEEL LTD. v. U.0.1. 
541 
. 
>-
refund. The appeal was finally disposed of with the Court disallowing addition A 
to the extent of DM 23 million. Thereafter final assessment was passed and 
differential duty was reduced, which was paid. While the litigation was going 
on, the Department had recovered Rs.6.02 crores on 10-7-1997 by e~cashing 
the back guarantee given by the Appellant. 
It is now submitted by Department before this Court that the Appellant B 
under the interim order dated 9-9-1991 was liable to pay interest@ 18% 
~· 
p.a on Rs.6.02 crores between the period 28-10-1991 (the date of refund) to 
.> 
10-7-1997 (the date Department encashed bank guarantee given by 
Appellant). The controversy between the parties lies on interpretation of the 
said interim order dated 9-9-1991. 
c 
Disposing of the appeals, the Court 
HELD: 1. The Department was not entitled to interest at the rate of 
18% p.a. on Rs. 6.02 crores during the period 28.10.1991 to 10.7.1997 
under the interim order dated 9.9.1991 of this Court. (Para 12) (546-G] 
D 
.Ai 
2. The entire controversy in the present case is irrelevant. The interim 
order passed by this Court was on the stay application made by the Department. 
The importer was allowed to withdraw Rs. 6.02 crores. The importer had 
undertaken to restore the amount ifthe Department succeeded in the appeal 
In the present case, it is necessary to keep in mind the conceptual difference E 
between the assessable value and the amount of duty payable thereon. The 
declared value was DM 46. 75 million. This was not accepted by the 
Department. They increased the value from DM 46.75 million to DM 84.15 
million. The Department included certain items. The importer objected to 
~ 
such inclusion. The loading of the value was to the tune ofDM 37.40 million. F 
In the final hearing, this Court disallowed the addition to the extent ofDM 
'+-
23 million out of DM 37.40 million, therefore, the importer substantially 
succeeded in getting the assessable value reduced. The duty amount of Rs. 
6.02 crores was based on the loading of certain items to the tune of DM 37.40 
million which this Court did not accept. Duty is derived from the assessable 
value. As can be seen from the order of f

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