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CA Final · Indirect Tax Laws · Types of Duty

Orchid Pharma Ltd cleared goods under provisional assessment under section 18 and paid ₹5,00,000. On final assessment, duty was fixed at ₹4,10,000, so ₹90,000 is refundable. Orchid had not passed on the incidence of the duty to any other person. The refund was not paid within three months from the date of the final assessment. Which statement is correct?

The ₹90,000 is paid to Orchid, not credited to the Fund, because it did not pass on the duty incidence. Since it was not refunded within three months of final assessment, interest at the rate fixed under section 27A is payable until the refund is made.

  1. AThe ₹90,000 is credited to the Fund, with no interest
  2. BThe ₹90,000 is paid to Orchid instead of being credited to the Fund, and interest at the rate fixed under section 27A is payable on the unrefunded amountCorrect
  3. CThe ₹90,000 is paid to Orchid, with interest at the rate under section 28AA from the first day of the month of provisional assessment
  4. DThe ₹90,000 is paid to Orchid, but interest is payable only after six months

Explanation

Section 18(2)(a) entitles the importer to a refund of the excess. Section 18(5)(a) provides that it is paid to the importer rather than credited to the Fund if incidence was not passed on. Under section 18(4), if not refunded within three months from the date of final assessment, interest at the rate fixed under section 27A is payable until refund. Section 28AA applies to amounts payable by the importer under 18(3), not to refunds.

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