HC directed Dept. to pay interest of 6% for wrong encashment of bank guarantee

Case Details: LM Wind Power Blades (India) (P.) Ltd. v. Union of India - [2023] 147 taxmann.com 114 (Karnataka)

Judiciary and Counsel Details

• • S.R. Krishna Kumar, J.
  • Tushar Jarwal & Raghuram Cadambi, Advs. for the Petitioner.
  • Akash. B. Shetty, Adv. for the Respondent.

Facts of the Case

The petitioner had furnished bank guarantees for release of goods and had also paid pre-deposit amount for filing appeal against order demanding tax and penalty. However, the department had illegally encashed bank guarantee. The petitioner filed writ petition against the same and the High Court had directed department to refund encashed amount with interest. The department had granted refund but had rejected interest claim. It filed petition against the non-compliance by the department.

High Court Held

The Honorable High Court noted that the petitioner was entitled to both refund and interest as per Court’s order. The contention of department that petitioner was not entitled to interest in the absence of provisions granting such interest in case of refund of bank guarantee enchased was erroneous as such interest accrued by virtue of judgement passed by High Court. Therefore, as per principle of restitution, the petitioner was entitled to interest. Thus the Court directed the department to pay interest at the rate of 6 per cent and the impugned order rejecting interest claim was quashed.