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CA Final · Indirect Tax Laws · Types of Duty

Under provisional assessment, Sagar Polymers Ltd paid excess duty of ₹90,000, later found refundable on final assessment on 10 June. The refund was not paid within three months of that assessment. Sagar had not passed the duty incidence to its customers. Which statement is correct under section 18?

Interest at the rate fixed under section 27A is payable on the un-refunded amount once three months from the final assessment have passed, and the refund goes to Sagar, not the Fund. Section 18(4) gives the interest and 18(5)(a) allows direct payment because the duty incidence was not passed on.

  1. AInterest is payable on the un-refunded amount after three months at the rate under section 27A, and the refund is paid to Sagar rather than credited to the FundCorrect
  2. BNo interest is ever payable on provisional assessment refunds, and the amount goes to the Fund
  3. CInterest is payable from 10 June itself, and the amount goes to the Fund
  4. DInterest runs only if Sagar applies in writing, and the refund is paid to Sagar

Explanation

Section 18(4) provides interest at the rate fixed under section 27A on a refundable amount not refunded within three months of the final assessment, subject to sub-section (5). Section 18(5)(a) directs payment to the importer instead of the Fund where the incidence was not passed on. No application condition is stated, and interest does not run from the assessment date.

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