Virchow Laboratories Ltd. v. Commissioner of Customs and Central Excise
The Revenue cannot demand interest on delayed duty and deny compensation for keeping wrongly collected funds. The court distinguished the later period during which the case awaited its adjudication.
By CA Nikhil Gupta · Reviewed against the retained judgment 2026-09-26
The Revenue cannot demand interest on delayed duty and deny compensation for keeping wrongly collected funds. The court distinguished the later period during which the case awaited its adjudication. The appeal was allowed. The department must pay 7.5% interest from 2 June 1997 to 9 March 2006, then 6% on unpaid interest from 9 March 2006 to 29 November 2011 within six weeks. Further interest from 29 November 2011 was refused.
What happened
The department collected ₹31,52,256 as interest from an exporter, kept it from 1997 until 2006, refunded the principal, and resisted interest for its retention.
Questions before the court
- Is the assessee entitled to interest on an amount wrongly collected and retained by the Revenue, and for which periods?
Why the court ruled this way
The Revenue cannot demand interest on delayed duty and deny compensation for keeping wrongly collected funds. The court distinguished the later period during which the case awaited its adjudication.
Controlling point
The Revenue cannot demand interest on delayed duty and deny compensation for keeping wrongly collected funds. The court distinguished the later period during which the case awaited its adjudication.
Order and next steps
The appeal was allowed. The department must pay 7.5% interest from 2 June 1997 to 9 March 2006, then 6% on unpaid interest from 9 March 2006 to 29 November 2011 within six weeks. Further interest from 29 November 2011 was refused.
Practical implications
The appeal was allowed. The department must pay 7.5% interest from 2 June 1997 to 9 March 2006, then 6% on unpaid interest from 9 March 2006 to 29 November 2011 within six weeks. Further interest from 29 November 2011 was refused. The rates and periods follow the particular refund claim and litigation history; no interest on unpaid interest was granted for the subsequent pendency.
Limits of this ruling
- The rates and periods follow the particular refund claim and litigation history; no interest on unpaid interest was granted for the subsequent pendency.
Law and judgment source
- Central Excise Act, 1944, section 11BB; interest on delayed refund
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Source checked: 2026-09-26 · Judgment paragraphs: paragraphs 15–21 · Later case history: not verified. Verify appeals, stays and subsequent orders before reliance.
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