Revenue deposit of Rs.50 lakh refunded with 12% interest as no demand confirmed against appellant

CESTAT NEW DELHI allowed the appeal regarding refund of Rs.50,00,000 deposited during investigation prior to show cause notice issuance. The tribunal held that since no demand was confirmed against the appellant and the amount was collected without legal authority, it constituted a revenue deposit requiring refund with interest. Relying on constitutional Article 300A and precedents from Parle Agro and Omjai Bhavani cases, CESTAT ruled the appellant entitled to 12% per annum interest from deposit date until refund, as the involuntary deposit remained appellant's property throughout the period.

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Issues Involved:
1. Refund of the amount of interest paid on the amount collected during the investigation.
2. Rate of interest applicable for the refund.

Detailed Analysis:

1. Refund of the Amount of Interest Paid:

The primary issue in this case pertains to the refund of the amount of interest paid on the amount collected during the investigation, which was paid before the issuance of the Show Cause Notice (SCN). The principal amount was refunded since no demand was confirmed against the appellant. However, the issue of the refund of the amount of interest was left open to be decided by the refund sanctioning authority.

The appellant was made to deposit Rs. 50,00,000/- involuntarily under the threat of arrest during the investigation on 18.03.2014. The proceedings initiated via five SCNs were dropped by the common Adjudicating Authority on 14.10.2019. The appellant then filed an application for claiming a refund of the Rs. 50,00,000/- on 22.01.2020. The Assistant Commissioner of Customs rejected the refund claim for want of the Original TR-6 Challan. The Commissioner (Appeals) set aside this rejection, holding that the issue of interest was to be decided by the refund sanctioning authority.

The Assistant Commissioner of Customs (Refund) later allowed the refund of Rs. 50,00,000/- but did not grant interest on the said amount. The Commissioner (Appeals) sanctioned the interest from the date of deposit till the date of refund, as applicable for delayed refund.

2. Rate of Interest Applicable for the Refund:

The appellant contested the rate of interest sanctioned by the Commissioner (Appeals), arguing that the interest should be at a higher rate. The Commissioner (Appeals) directed the refund sanctioning authority to allow payment of interest from the date of deposit till the final payment was made with applicable rates of interest for delayed refunds.

The appellant cited various decisions and provisions, including Section 129EE of the Customs Act, 1962, and the Central Government's Circular No. 984/8/2014-CX., dated 16.09.2014, which provides for interest on pre-deposited amounts. The appellant argued that any deposit in the hands of the department has to be refunded with interest from the date of deposit.

The Tribunal noted that the amount of Rs. 50,00,000/- was deposited before the issuance of the SCN and that the adjudication order did not confirm any demand against the appellant. Therefore, the collection of the amount was without the authority of law, and the amount should be treated as a deposit. The Tribunal relied on several decisions, including Parle Agro Pvt. Ltd. and Omjai Bhavani Silk Mills (P) Ltd., which held that such amounts collected during investigations are revenue deposits and must be refunded with interest from the date they were wrongly collected.

The Tribunal also referred to the Supreme Court's decision in Kuil Fireworks Industries, which ordered pre-deposits to be returned with 12% interest since the demand raised was quashed. The Tribunal observed that the rate of interest varies from 6% to 18%, subject to notification.

The Tribunal concluded that the appellant is entitled to interest at the rate of 12% per annum on the refunded amount, to be calculated from the date of deposit till the date of refund. This decision aligns with the Tribunal's previous rulings in similar cases, such as Duggar Fibre Pvt. Ltd. and Emmar Mgf Construction Pvt. Ltd.

Conclusion:

The Tribunal upheld the findings of the order under challenge, confirming the appellant's entitlement to a refund of the amount along with interest. However, it held that the appellant is entitled to interest at the rate of 12% per annum, calculated from the date of the deposit until the date of refund. The present appeal was allowed, and the order was pronounced in the open court on 06.09.2024.

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