Deposit versus duty in customs refunds: contingent payments made without adjudication are refundable and not barred by section 27 limitation.

Money paid at the Department's instance as a contingent cash equivalent of customs duty foregone on deemed export supplies, without any adjudication fixing duty liability, retains the character of a deposit and is refundable as such. On that basis, the ordinary limitation under section 27 of the Customs Act, 1962 for customs duty refunds does not apply. The later sanction of loan preserved the assessee's right to recover the amount, and the refund claim was therefore not barred by time. The impugned refusal of refund could not stand, and refund was held payable to the assessee.

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Issues: (i) Whether the amount paid by the appellants as the cash equivalent of customs duty foregone on deemed export supplies was to be treated as a deposit or as duty for the purpose of refund. (ii) Whether the refund claim was barred by limitation under section 27 of the Customs Act, 1962.

Issue (i): Whether the amount paid by the appellants as the cash equivalent of customs duty foregone on deemed export supplies was to be treated as a deposit or as duty for the purpose of refund.

Analysis: The payment was made at the instance of the Department in anticipation of delay in World Bank funding, and the suppliers continued to enjoy the exemption structure throughout. The amount was not paid pursuant to any adjudication determining duty liability, and the later sanction of loan revived the appellants' claim to recover the money. In these circumstances, the payment retained the character of a deposit until refund was sought.

Conclusion: The amount was rightly treated as a deposit and not as final duty payment for refund purposes, in favour of the assessee.

Issue (ii): Whether the refund claim was barred by limitation under section 27 of the Customs Act, 1962.

Analysis: Since the payment was only a deposit and was made in the peculiar context of deemed export benefits pending loan sanction, the statutory limitation applicable to ordinary customs duty refunds did not govern the claim. The Tribunal also noticed that similar claims had been allowed elsewhere and that the Revenue had accepted those orders. The reliance on Mafatlal Industries did not advance the Revenue's case on these facts.

Conclusion: The refund claim was not time-barred under section 27 of the Customs Act, 1962, in favour of the assessee.

Final Conclusion: The impugned order refusing refund could not stand, and the appellants were entitled to refund of the amounts paid.

Ratio Decidendi: Where money is paid at the Department's instance as a contingent cash equivalent pending a future event and no adjudication converts it into duty, the payment retains the character of a deposit and the ordinary customs refund limitation under section 27 does not apply.

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