2024 (8) TMI 1552 - HC - Customs

High Court orders refund of INR 34 lakh pre-deposit within four weeks after appeal success

SMT. MADHU BALA DHAWAN Versus PRINCIPAL COMMISSIONER OF CUSTOMS PREVENTIVE AND ANR

Delhi HC directed respondents to refund pre-deposit amount of INR 34,72,909 within four weeks after their failure to process refund following CESTAT's ... Failure on the part of the respondents to refund the pre-deposit amount along with applicable interest pursuant to the termination of proceedings in terms of a final order framed by the Customs Excise and Service Tax Appellate Tribunal - interest on delayed refund - HELD THAT:- From the affidavit which has been filed by the respondents in the present proceedings, it is contended that a deficiency memo was issued to the writ petitioner on 12 July 2024 requiring further documentation. It is their case, that subject to the aforesaid compliance being affected, they would be “willing to proceed with the refund” - It is unable to appreciate the stand as struck bearing in mind the undisputed position that the claim for refund had been made as far back as in September 2019. The order of the CESTAT itself had been passed on 30 September 2019 and which had then been followed by a formal application for refund being made on 14 October 2019. The deficiency memo has come to be issued for the first time in July 2024. Although, the aforesaid deficiency memo was also duly replied to on 29 July 2024, no further action appears to have been taken by the respondents, at least till we had taken up the writ petition for consideration today. This Court in Flipkart India Private Limited vs. Value Added [2023 (8) TMI 987 - DELHI HIGH COURT] where the legal position with respect to pre-deposit not constituting a deposit of tax or duty’ was highlighted and it was held that 'the claim raised by the Department in the show-cause notice is thoroughly dishonest and baseless. In respect of a deposit made under section 35F, provisions of section 11B can never be applicable. A deposit under section 35F is not a payment of duty but only a pre-deposit for availing the right of appeal. Such amount is bound to be refunded when the appeal is allowed with consequential relief.' Conclusion - A deposit under section 35F is not a payment of duty but only a pre-deposit for availing the right of appeal. Such amount is bound to be refunded when the appeal is allowed. The respondents is directed to release amount of INR 34,72,909/- within a period of four weeks from today - petition allowed. ISSUES PRESENTED and CONSIDEREDThe core legal issues considered in this judgment are:Whether the petitioner is entitled to a refund of the pre-deposit amount of INR 34,72,909/- following the favorable order by the Customs Excise and Service Tax Appellate Tribunal (CESTAT).Whether the petitioner is entitled to interest on the delayed refund of the pre-deposit amount under Section 129EE of the Customs Act, 1962.The applicability of procedural requirements for refund claims, particularly in the context of pre-deposits made for appellate remedies.ISSUE-WISE DETAILED ANALYSIS1. Entitlement to Refund of Pre-DepositRelevant Legal Framework and Precedents: The legal framework governing the refund of pre-deposits is primarily Section 129EE of the Customs Act, 1962. The Court also referenced precedents such as the decision in Suvidhe Ltd. v. Union of India and MRF Ltd. v. Commissioner of Trade and Taxes, which clarify that pre-deposits are not considered tax or duty but are made to avail appellate remedies.Court's Interpretation and Reasoning: The Court noted that the pre-deposit was made as a condition for pursuing the appeal and not as a tax or duty. Therefore, the petitioner is entitled to a refund once the appellate authority's order is favorable.Key Evidence and Findings: The Court acknowledged the undisputed fact that the CESTAT had ruled in favor of the petitioner, annulling the demand, which necessitated the refund of the pre-deposit.Application of Law to Facts: The Court applied Section 129EE, which mandates the refund of pre-deposits with interest from the date of deposit to the date of refund.Treatment of Competing Arguments: The respondents contended that procedural compliance was required before processing the refund. The Court, however, found this argument unpersuasive given the significant delay and the clear legal position on pre-deposits.Conclusions: The Court concluded that the petitioner is entitled to the refund of the pre-deposit amount.2. Entitlement to Interest on Delayed RefundRelevant Legal Framework and Precedents: Section 129EE of the Customs Act, 1962, provides for interest on delayed refunds. The Court also referred to the decision in Flipkart India Private Limited vs. Value Added, which highlighted the non-tax nature of pre-deposits.Court's Interpretation and Reasoning: The Court interpreted Section 129EE to mean that interest is payable on the delayed refund of pre-deposits. The Court emphasized that procedural delays by the respondents cannot negate the petitioner's right to interest.Key Evidence and Findings: The Court noted the significant delay in processing the refund despite the CESTAT order and the petitioner's compliance with procedural requirements.Application of Law to Facts: The Court applied the provision of Section 129EE, determining that interest should be calculated from the date of deposit to the date of refund.Treatment of Competing Arguments: The respondents argued that procedural deficiencies justified the delay. The Court rejected this argument, emphasizing the established legal principle that pre-deposits are not subject to the same procedural rigors as tax payments.Conclusions: The Court concluded that the petitioner is entitled to interest on the delayed refund, calculated from the date of deposit.SIGNIFICANT HOLDINGSThe Court held that the petitioner is entitled to a refund of the pre-deposit amount along with interest. The Court emphasized the following principles:'A deposit under section 35F is not a payment of duty but only a pre-deposit for availing the right of appeal. Such amount is bound to be refunded when the appeal is allowed with consequential relief.''The insistence upon a procedural step, i.e., filing of a form which is purely for the purpose of administrative convenience cannot in any manner fix the period or periods of limitation when the amounts became due on the question of interest.'The Court directed the respondents to release the amount of INR 34,72,909/- within four weeks, along with interest as contemplated under Section 129EE of the Act.