Court orders refund of coercive deposit with interest, rejects adjustment against future tax demands

The High Court of Punjab & Haryana at Chandigarh ruled in favor of the petitioners in a case involving a coercive deposit made by an export-oriented unit without any outstanding tax demand. The court directed the Department to refund the deposited amount of Rs. 50 lacs along with 9% interest per annum, to be completed within three months from the date of the court's order. The court rejected the Department's argument of adjusting the deposit against future demands, emphasizing that no amount had been determined as due from the petitioners.

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Issues involved: Coercive deposit without demand for duty or tax, petition for mandamus to refund amount with interest, notice under Section 28 of Customs Act for a different amount, contention on adjusting deposited amount against future demand, court's decision on refund with interest.

In response to a petition filed under Article 226 of the Constitution, the High Court of Punjab & Haryana at Chandigarh heard arguments regarding a coercive deposit of Rs. 50 lacs made by a hundred per cent export oriented unit without any outstanding demand for duty or tax. The respondents, in their reply, mentioned a notice issued by the Commissioner of Customs, New Delhi under Section 28 of the Customs Act for a different amount, but acknowledged that no final adjudication had been made and there was no outstanding amount against the petitioners.

The Department's counsel contended that the deposited amount would be adjusted against any future demand once finalized, and therefore, requested the court not to direct a refund to the petitioners. However, the court disagreed with this argument, stating that since no amount had been determined as due from the petitioners, there was no justification for the Department to retain the deposited sum of Rs. 50 lacs made in June 1999. The court ruled in favor of the petitioners, directing the respondents to refund the amount along with interest at 9% per annum from the date of deposit till the date of its return, to be completed within three months from the date of receipt of the court's order.

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