Single Member Bench can decide appeals on interest for refund deposits under Section 129C(4), separate claim maintainable

CESTAT Ahmedabad held that a Single Member Bench has jurisdiction to decide appeals involving only interest on refund of revenue deposits, as interest is distinct from duty, fine, or penalty and is not excluded under Section 129C(4) of the Customs Act, 1962. The Tribunal followed consistent precedents, including those rendered in writ or equity jurisdiction, recognizing them as binding where they embody settled legal principles on compensation for wrongful retention of money. It was held that a separate application for interest is maintainable. The appeal was allowed, directing payment of interest at 12% p.a. on the refunded deposit of ?5 crore from the date of deposit until refund.

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Issues: (i) Whether a Single Member Bench has jurisdiction to decide an appeal claiming interest on refund of a deposit made during investigation. (ii) Whether interest is payable on refund of revenue deposit made during investigation and, if so, the rate and period of such interest.

Issue (i): Whether a Single Member Bench can adjudicate a dispute limited to claim of interest on refund of deposit.

Analysis: Section 129C(4) creates a general class of disputed cases that may be heard by a Single Member subject to specific exclusions relating to determination of rate of duty, valuation issues, and cases where the duty or difference in duty or penalty exceeds prescribed monetary limits. A dispute confined to claim of interest on refund of deposit does not fall within those excluded categories. Precedents interpreting the pari materia provision for Single Member jurisdiction support inclusion of interest disputes where no determination on duty, valuation or pecuniary threshold has been made prior to hearing.

Conclusion: Single Member Bench has jurisdiction to decide the appeal concerning claim of interest on refund of deposit.

Issue (ii): Whether interest is payable on refund of a revenue deposit made during investigation and, if so, at what rate and for what period.

Analysis: In the absence of an express statutory provision prescribing interest for refund of revenue deposits in the Customs Act, principles established by higher courts permit awarding interest as compensation where revenue wrongfully retains money belonging to a party. Authorities applying this principle in indirect tax context have directed payment of interest on deposits/refunds. Comparative statutory notifications under related fiscal statutes show rates varying between 6% and 18%, and coordinated tribunal and high court decisions have adopted 12% p.a. as a reasonable equitable rate for compensation on such deposits, calculated from date of deposit until date of actual refund. A separate application seeking interest on a refund is maintainable where the original refund order did not expressly determine entitlement to interest under the statutory delayed-refund provision.

Conclusion: Interest is payable on the refunded deposit. Interest is awarded at the rate of 12% per annum from the date of deposit until the date of repayment, in favour of the appellant (assessee).

Final Conclusion: The appeal is allowed to the extent that the appellant is entitled to interest on the refunded deposit; the Single Member Bench is competent to decide the claimed relief and the refund of the deposit attracts interest at 12% per annum from deposit date until repayment.

Ratio Decidendi: In the absence of statutory provision for interest on refund of revenue deposits, courts and tribunals may award equitable interest as compensation where the Revenue wrongfully retains funds; in such cases a 12% per annum rate is an appropriate and adoptable measure of compensation from the date of deposit until actual refund.

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