Revenue must refund pre-deposits paid under protest when penalties set aside by appellate authorities

CESTAT Allahabad allowed the appeal regarding refund of pre-deposits paid under protest. The Revenue rejected the refund claim citing limitation period under Section 27 of Customs Act. The Tribunal held that when fines and penalties are set aside by appellate authorities, Revenue must refund such amounts as implementation of the appellate order. Section 11B of Central Excise Act provides that one-year limitation does not apply when amounts are paid under protest. Since the redemption fine and penalties were paid under protest for goods clearance while the order was under appeal, the limitation period under Section 27 does not bar the refund claim. The impugned order was set aside.

---

---

Issues Involved
1. Applicability of the Limitation Period u/s 27 of the Customs Act, 1962 for Refund Claims.
2. Refund of Penalty and Fine Paid Under Protest.

Summary of Judgment

1. Applicability of the Limitation Period u/s 27 of the Customs Act, 1962 for Refund Claims
The learned Commissioner (Appeals) held that the limitation period of one year u/s 27(1B)(b) of the Customs Act, 1962 applies to the refund claims, commencing from the date of the Tribunal's Final Order, i.e., 24.08.2018. The Commissioner referenced Supreme Court decisions, including Porcelain Electrical Mfg. Co. (1998), UOI vs. Kirloskar Pneumatic Co. (1996), and Miles India Ltd., which established that refund claims filed before Departmental Authorities are governed by statutory time limits and not general laws of limitation. The appeals were dismissed as the refund claims were filed beyond the prescribed period.

2. Refund of Penalty and Fine Paid Under Protest
The appellants argued that the terms "duty" or "interest" in Section 27 are not equivalent to "penalty" and "fine," and thus the limitation period should not apply to their refund claims. They cited cases like Rajendra Mechanical Industries Ltd. (2005), Abdulla Gani (2013), and Cooper Pharma (2017) to support their contention. The Tribunal noted that the amounts were paid under protest for the release of confiscated goods and that the Tribunal's order allowed for consequential relief. The Tribunal held that the refund claims should be processed under Section 27 but should not be barred by the limitation period as the amounts were paid under protest.

Conclusion
The Tribunal concluded that the amounts paid under protest are not subject to the limitation period u/s 27 of the Customs Act, 1962. Therefore, the impugned order was set aside, and both appeals were allowed.

Final Order
Both appeals are allowed.

---