Deposit paid during investigation can be re-credited after proceedings drop without a refund claim, if it was not final duty.

An amount paid during investigation and while duty and classification disputes were pending was treated as a deposit made under protest, not as final duty payment. Once the proceedings were dropped, the amount lost the character of duty, so suo motu re-credit was held valid without filing a refund claim under Section 11B. The failure to intimate the department before taking re-credit was treated as only a procedural lapse and did not justify recovery. On that basis, recovery of credit with interest and the penalty were unsustainable.

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Issues: Whether the amount paid during investigation was a deposit or duty, and whether suo motu re-credit of that amount after the proceedings were dropped was valid without filing a refund claim under Section 11B.

Analysis: The amount was paid in the course of investigation while duty demands and classification disputes were pending, and the record showed that the payment was made under protest for substantial entries and as a lump sum during departmental action. Once the demand proceedings were dropped, the amount ceased to retain the character of duty and was treated as a deposit made pending adjudication. In that situation, insistence on a refund application under Section 11B was held unnecessary, and the failure to intimate the department before taking re-credit was treated as only a procedural lapse. The recovery order, interest and penalty could not be sustained on the footing that the amount was an ordinary duty payment.

Conclusion: The suo motu re-credit was valid, the recovery of credit with interest was unsustainable, and the penalty also could not survive.

Final Conclusion: The appeal succeeded because the payment was treated as a deposit made during investigation, and the assessee was entitled to consequential re-credit after the proceedings were dropped.

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