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CMA Final · Indirect Tax Laws and Practice · Refund

Under section 129EE of the Customs Act, 1962, Arjun Exports deposited Rs 20,00,000 under section 129E while appealing, and the appellate authority later ordered its refund. The Central Government has fixed the rate at 6% per annum for this purpose, and the refund was made exactly 9 months after payment. Assuming simple interest from the payment date to the refund date, the interest payable is:

Interest is Rs 90,000. Section 129EE gives interest on the deposit from the payment date to the refund date at the notified rate, and 6% lies within the 5% to 36% range. Rs 20,00,000 x 6% x 9/12 equals Rs 90,000.

  1. ARs 90,000Correct
  2. BRs 1,20,000
  3. CRs 60,000
  4. DRs 1,80,000

Explanation

Interest runs on the deposited amount from the date of payment until the date of refund at the rate fixed by the Central Government, which must be between 5% and 36%. 6% is within that range. Interest = 20,00,000 x 6% x 9/12 = Rs 90,000. Rs 1,20,000 wrongly uses a full year.

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