Revenue deposits refunded after demand is set aside carry 12% interest from deposit date, with duty-refund limitation inapplicable.

Amounts deposited during investigation, once the underlying demand is set aside, are treated as revenue deposits rather than duty payments, so interest is payable on the entire refunded sum and not confined to any pre-deposit portion. The applicable rate followed settled authority at 12% per annum from the date of deposit. A limitation objection based on duty-refund provisions was rejected because the claim arose from return of a revenue deposit, not a refund governed by the ordinary duty-refund regime. The retained amount was therefore refundable with interest, and the limitation bar did not apply.

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Issues: (i) Whether interest was payable on the entire amount refunded to the assessee out of the amount deposited during investigation, and if so at what rate and from what date; (ii) whether the claim for interest was barred by limitation under the refund provisions.

Issue (i): Whether interest was payable on the entire amount refunded to the assessee out of the amount deposited during investigation, and if so at what rate and from what date.

Analysis: The amount in question was not a duty payment but a deposit made during investigation, and the demand itself had already been set aside. Such a deposit could not be treated as duty for the purpose of restricting interest only to a portion of the refunded sum. The Tribunal relied on the settled position that money retained by the department without authority after the liability is set aside carries interest, and that refund of revenue deposit is not governed by the same regime as refund of duty. The Tribunal further followed the line of authority fixing interest at 12% on such refunded amounts from the date of deposit.

Conclusion: Interest was payable on the entire refunded amount, not merely on the pre-deposit portion, at 12% per annum from the date of deposit, in favour of the assessee.

Issue (ii): Whether the claim for interest was barred by limitation under the refund provisions.

Analysis: Since the amount was a revenue deposit and not a duty refund, the ordinary limitation applicable to duty refund claims under Section 11B could not govern the claim for interest. The relevant date was linked to the proceedings which established the assessee's entitlement, and the department had no lawful basis to retain the money after the demand was set aside.

Conclusion: The limitation objection was rejected, in favour of the assessee.

Final Conclusion: The order denying interest on the full refunded amount was set aside and the assessee was held entitled to interest on the remaining refund amount at 12% per annum from the date of deposit.

Ratio Decidendi: Amounts deposited during investigation as revenue deposits, once the underlying demand is set aside, are refundable with interest and are not to be confined to the duty-refund limitation regime applicable under Section 11B.

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