Indirect Tax Laws · Refund

Interest on Delayed Refund under Customs: Sections 27A and 129EE

Updated 5 October 2026 · Fact-checked

Under section 27A, if a customs duty refund ordered under section 27(2) is not paid within three months of the application, interest runs from the day after three months until the refund date. Under section 129EE, interest on a refunded appeal pre-deposit runs from the date of payment of the deposit, up to but excluding the refund date. Both use the rate notified under section 27A.

Understand Interest on Delayed Refund (Sections 27A and 129EE)

A refund of customs duty is the government returning money it should not have kept. If it holds that money for too long, you lose its use. The Customs Act therefore pays you interest for the delay. Two sections do this.

Section 27A covers refunds of duty under section 27. You file a refund application. The department gets three months to sanction and pay. If the refund ordered is not paid within those three months from the date the application was received, interest becomes payable. It runs from the date immediately after the three months expire until the date of refund. The rate is fixed by the Central Government by notification, within a band of not below 5% and not above 36% per annum.

The order of refund need not come from the proper officer. If the Commissioner (Appeals), the Appellate Tribunal or a court orders the refund, it is treated as an order under section 27(2) for this purpose. The interest still counts from the day after three months from the date the original refund application was received.

Section 129EE covers the pre-deposit. To appeal under section 129E, you deposit a part of the duty or penalty. If you win and the deposit must be refunded as a result of the order of the Appellate Authority or the Tribunal, you get interest at the rate fixed under section 27A. There is no three-month waiting period here. Interest runs from the date you paid the deposit until, but excluding, the date of refund.

So the key contrast is the start date. In 27A it starts after a three-month grace period from the application. In 129EE it starts from the date of payment of the deposit.

Key rules to remember

Section 27A: trigger: Refund ordered under section 27(2) not paid within 3 months from date of receipt of application ⇒ interest payable; The three months are counted from receipt of the refund application, not from the date of the order.
Section 27A: interest period: From the date immediately after expiry of 3 months from receipt of application, till the date of refund; If the refund is paid within three months, no interest is payable.
Section 27A: rate: Rate notified by Central Government, not below 5% and not above 36% per annum; The rate is notified by the Central Government (currently 6% per annum as per the notification in force). In the exam, the question will give the rate; use it.
Section 129EE: interest period: From the date of payment of the pre-deposit, till (but excluding) the date of refund; Applies when the deposit under section 129E is refunded because of an order of the Appellate Authority or the Tribunal.
Section 129EE: rate: Same rate as fixed under section 27A; The rate is not separately fixed. It is borrowed from 27A.
Interest computation: Interest = Refund amount × Rate ÷ 100 × Number of days ÷ 365; Use months ÷ 12 if the question gives whole months.

How to solve Interest on Delayed Refund (Sections 27A and 129EE) questions

Use this method for any question on interest on delayed customs refund. It separates the two sections first, because their start dates differ.

1Identify what is being refunded. Duty refund on an application under section 27 points to section 27A. Refund of an amount deposited to file an appeal under section 129E points to section 129EE.
2Note the key dates: the date the application was received (for 27A) or the date the deposit was paid (for 129EE), and the date of actual refund.
3For section 27A, add three months to the date of receipt of the application. If the refund was paid on or before that date, interest is nil.
4Fix the start date. For 27A it is the day after the three months end. For 129EE it is the date of payment of the deposit.
5Fix the end date. For 27A it is the date of refund. For 129EE it is the day before the refund date (the refund date is excluded).
6Take the rate given in the question, or the notified rate under section 27A. Check it lies within 5% to 36%.
7Compute: amount × rate × days ÷ 365. Show the working and the dates.
8Write the conclusion in one line: provision, facts, interest amount.

Quickest way: Two questions, then multiply

When to use it: Use in MCQs and short case scenarios when you have under two minutes.

Ask: is this a duty refund or an appeal pre-deposit refund?
Duty refund: skip the first three months from the application date. Deposit refund: start counting from the day of payment.
Count the days or months to the refund date.
Multiply amount × rate × time. Check the answer is not zero before choosing an option, because a refund paid within three months under 27A carries no interest.

Common mistakes in Interest on Delayed Refund (Sections 27A and 129EE)

Counting the three months from the date of the refund order instead of the date the application was received.
Students link the delay with the order, as if the department is late only after it decides.
Fix: Section 27A counts three months from receipt of the application. Write the date of receipt first in your working.
Charging interest from the date of application under section 27A.
Students forget the three-month grace period.
Fix: Interest starts on the day after the three months expire. The first three months are interest-free.
Applying a three-month waiting period to the pre-deposit under section 129EE.
Students merge the two sections into one rule.
Fix: Under 129EE, interest runs from the date of payment of the deposit. Remember: 27A has a grace period, 129EE does not.
Including the refund date while counting days under section 129EE.
Students count both end dates by habit.
Fix: The section says till, but excluding, the date of refund. Leave the refund date out.
Treating a refund ordered by the Commissioner (Appeals), Tribunal or court as outside section 27A.
Students think only the proper officer's order qualifies.
Fix: Such an order is deemed to be an order under section 27(2), and the interest period still counts from three months after the application.
Using a made-up rate or ignoring the rate in the question.
Students try to recall a figure instead of reading the facts.
Fix: Use the rate given in the question. If none is given, say the rate is as notified under section 27A, within 5% to 36% per annum.

Worked examples

Example 1

Delta Ltd imported goods and paid excess customs duty of ₹4,00,000. It filed a refund application under section 27 which the department received on 10 June 2025. The refund was ordered and actually paid on 22 November 2025. Assuming the notified rate is 6% per annum, compute the interest payable under section 27A.

Show the solution

Provision: under section 27A, interest is payable if the refund ordered under section 27(2) is not paid within three months from receipt of the application.
Three months from 10 June 2025 end on 10 September 2025. The refund was paid after this date, so interest is payable.
Interest runs from 11 September 2025 (the day after three months) to 22 November 2025, counting both days.
Days: September 20 + October 31 + November 22 = 73 days.
Interest = ₹4,00,000 × 6% × 73 ÷ 365 = ₹24,000 × 73 ÷ 365 = ₹4,800.

Answer: Interest payable under section 27A is ₹4,800.

Example 2

Sigma Ltd lost a customs case and paid a pre-deposit of ₹15,00,000 on 1 March 2025 to file an appeal under section 129E. The Tribunal allowed the appeal, and the deposit was refunded on 25 July 2025. Assuming the rate under section 27A is 6% per annum, state the interest payable under section 129EE.

Show the solution

Provision: under section 129EE, where the pre-deposit is refundable because of an order of the Appellate Authority or the Tribunal, interest is payable at the rate fixed under section 27A.
There is no three-month grace period. Interest runs from the date of payment of the deposit, 1 March 2025, till but excluding the date of refund, 25 July 2025.
Days: March 31 + April 30 + May 31 + June 30 + July 24 (1 July to 24 July) = 146 days.
Interest = ₹15,00,000 × 6% × 146 ÷ 365 = ₹90,000 × 146 ÷ 365 = ₹36,000.

Answer: Interest payable under section 129EE is ₹36,000, computed from the date of payment of the deposit and excluding the refund date.

Exam tips

Write the section number in the first line of your answer, then the facts, then the computation. This follows provision, facts, conclusion.
In case-scenario MCQs, check the first trap: is the refund paid within three months of the application under 27A? If so, the answer is nil interest.
State the contrast in theory answers: 27A has a three-month grace period from the application; 129EE runs from the date of deposit and excludes the refund date.
Mention that a refund ordered by the Commissioner (Appeals), Tribunal or court is treated as an order under section 27(2) for interest purposes.
Always show the dates and the day count. Marks are given for method even if the arithmetic slips.

Practice questions from Refund

Interest on Delayed Refund (Sections 27A and 129EE) in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

CMA FinalInterest on Delayed Refund under Section 129EE

Interest on Delayed Refund (Sections 27A and 129EE): frequently asked questions

When does interest start under section 27A of the Customs Act?

Interest starts on the day immediately after three months from the date the refund application was received. It runs until the date the refund is paid. If the refund is paid within the three months, no interest is payable.

What is the rate of interest on delayed refund under section 27A?

The rate is fixed by the Central Government by notification, not below 5% and not above 36% per annum. It is currently 6% per annum as per the notification in force. In the exam, use the rate given in the question.

From which date is interest paid on a refund of pre-deposit under section 129EE?

Interest is paid from the date of payment of the pre-deposit till, but excluding, the date of refund. There is no three-month waiting period. The rate is the one fixed under section 27A.

Does section 129EE apply to every refund of pre-deposit?

It applies when the amount deposited under section 129E must be refunded as a result of an order of the Appellate Authority or the Tribunal. Read the facts to confirm that the deposit is being refunded because the appeal succeeded.