Revenue deposits found refundable during investigation entitled to 6% interest per annum from deposit date

CESTAT Hyderabad held that amounts deposited during investigation, subsequently found refundable, constitute revenue deposits entitled to interest. Following SC precedent in Sandvik Asia Ltd, which recognized compensatory nature of interest on delayed refunds, and tribunal decisions in Parle Agro Ltd and Riba Textiles Ltd, the court granted 6% interest per annum from deposit date until refund. The court rejected unjust enrichment principles, noting deposits were made under protest during investigation without legal sanction. The appellant-exporter successfully discharged burden under Section 28D, with deposits made in December 2009 after export invoice dated August 2008 and remittance received before March 2009. Appeal allowed in part.

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Issues Involved:
1. Whether the grant of interest has been rightly refused on the amount deposited during investigation, which was subsequently found to be refundable.
2. Whether unjust enrichment is attracted on the principal amount of refund granted, which was deposited during the course of investigation.

Summary:

1. Grant of Interest on Refund:
The appellant/assessee exported iron ore fines and paid export duty based on the Fe content. A dispute arose regarding the Fe content, leading to the appellant depositing Rs.1,18,12,250/- under protest during the investigation. The Tribunal previously ruled in favor of the appellant, finding no collusion or wilful misstatement. Consequently, the appellant sought a refund with interest.

The Assistant Commissioner sanctioned the refund but denied interest, referencing the Andhra Pradesh High Court's decision in Maithan Ceramics Ltd vs CCT, Visakhapatnam, which stated that interest is only applicable from three months after the appellate authority's order, not from the date of deposit.

The Tribunal, however, referenced the Supreme Court's ruling in Sandvik Asia Ltd vs CIT-I, Pune, which granted interest on delayed refunds, and similar Tribunal decisions granting interest from the date of deposit. The Tribunal concluded that the amount deposited during the investigation should be treated as a 'Revenue deposit' and granted interest at 6% per annum from the date of deposit till the date of refund.

2. Unjust Enrichment:
The Revenue's appeal contended that the principle of unjust enrichment was not properly examined. The Tribunal noted that both the Adjudicating Authority and the Commissioner (Appeals) found no evidence that the appellant passed on the duty incidence to another party. The Tribunal cited the Madras High Court's decision in CCE, Coimbatore vs Pricol Ltd, which held that deposits made during investigations are not subject to unjust enrichment. The Tribunal affirmed that the appellant had discharged the burden under Sec 28D of the Customs Act, and the doctrine of unjust enrichment was not applicable.

Conclusion:
The Tribunal allowed the assessee's appeal, directing the grant of interest at 6% per annum from the date of deposit till the date of refund, and dismissed the Revenue's appeal, finding no merit in the unjust enrichment claim.

Pronounced in the Open Court on 08.04.2024.

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