Interest on customs refund deposits applies where payment was made under mistake of law and later refunded.

An amount deposited during customs investigation under a mistaken belief of duty liability, and at the Revenue's insistence, retained the character of a refundable deposit rather than a voluntary duty payment. Once the assessee's liability was negated and refund was sanctioned, denial of interest on the delayed refund was unsustainable. The CESTAT held that interest was payable at 12% from the date of deposit until the date of refund, and the assessee was entitled to consequential monetary relief on the refunded amount.

---

---

Issues: Entitlement to interest on the amount deposited during investigation and later refunded under the Customs Act, 1962.

Analysis: The amount was deposited during investigation under the mistaken impression of duty liability and at the insistence of the Revenue, while the assessee's liability was ultimately negatived. Such payment was not a voluntary discharge of duty but a deposit made under mistake of law. The refund having been sanctioned, the denial of interest was not sustainable. The issue of interest on delayed refund was treated as settled in favour of the assessee, and the applicable rate was taken as 12% from the date of deposit till the date of refund.

Conclusion: The appellant was entitled to interest at 12% on the refunded amount from the date of deposit till the date of refund, and the denial of interest was set aside.

Final Conclusion: The appeal succeeded to the extent of grant of interest on the refunded deposit, and the appellant obtained consequential monetary relief in addition to the refund already sanctioned.

Ratio Decidendi: An amount deposited during investigation under mistake of law and at the Revenue's insistence does not lose its character as a refundable deposit, and upon refund the assessee is entitled to interest from the date of deposit till the date of refund.

---