2002 (8) TMI 135 - HC - Customs

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 ... Refund of deposit made without subsisting demand - requirement of adjudication before retention of provisional deposit - adjustment of provisional deposit against future demand - interest on deposited amount from date of deposit - mandamus under Article 226Refund of deposit made without subsisting demand - requirement of adjudication before retention of provisional deposit - interest on deposited amount from date of deposit - Petitioners entitled to refund of Rs. 50 lacs deposited in June 1999, together with interest, as no adjudicated demand existed against them. - HELD THAT: - The petitioners, a 100% export oriented unit, deposited the sum voluntarily or under coercion in June 1999 though no demand or adjudication had been made against them. The Department relies on a subsequently issued show cause notice and contends that the deposit may be adjusted if a demand is finally determined. The Court held that in the absence of any adjudicated liability the Department has no justification to retain the deposited amount. The possibility of future creation of a demand does not permit indefinite retention; if and when any demand is determined in due course, statutory recovery mechanisms remain open to the Department. Consequently, the deposited amount must be refunded, and the petitioners must be compensated by payment of interest at the rate directed by the Court from the date of deposit until return.Writ petition allowed; respondents directed to refund the deposited sum with interest at 9% per annum from date of deposit until its return within three months.Final Conclusion: The Court allowed the petition under Article 226, directing refund of the Rs. 50 lacs deposited in June 1999 with interest at 9% per annum from the date of deposit until its return, to be effected within three months; no remand ordered. 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.