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CA Final · Indirect Tax Laws · Types of Duty

Orient Exports Pvt Ltd's provisional assessment was finalised and an excess of ₹2,00,000 became refundable under section 18(2)(a). The refund was not paid within three months of the date of final assessment. Which statement is correct about interest?

Interest is payable on the un-refunded amount at the rate fixed under section 27A until the refund is made. Section 18(4) triggers this when the refund is not paid within three months of final assessment; the 28AA rate relates to amounts the importer owes.

  1. ANo interest is ever payable on refunds arising from provisional assessment
  2. BInterest is payable on the un-refunded amount at the rate fixed under section 27A till the date of refundCorrect
  3. CInterest is payable only from the date of the provisional assessment
  4. DInterest is payable at the rate fixed under section 28AA from the first day of the month of provisional assessment

Explanation

Section 18(4) provides that, subject to sub-section (5), if the refundable amount is not refunded within three months from the date of final assessment, interest is paid on the un-refunded amount at the rate fixed under section 27A till the date of refund. The section 28AA rate applies to amounts payable by the importer under sub-section (3), so that option is wrong.

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