TaxTMI 
TaxTMI 
Interest on Refund of Amounts Deposited under Protest during Customs Investigation
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....rate granted by the departmental authorities. The decision turns on a material distinction. A statutory pre-deposit made for maintaining an appeal under Section 129E is governed by the specific interest mechanism in Section 129EE and the notified rate fixed under that provision. An amount paid during investigation, although it may later be appropriated towards a confirmed demand, does not automatically become a Section 129E pre-deposit merely because a portion of the overall deposit was treated as such for appellate purposes. Within the territorial jurisdiction concerned, the Tribunal followed the jurisdictional High Court ruling reproduced in the order. That ruling held that, in the absence of a statutory provision fixing interest on....
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....ed to the balance that had been deposited during investigation. Refund was granted, but interest was allowed only at 6% per annum. The assessee contended that the governing rate for the investigation deposit was 12% per annum. This distinction is significant because customs law contains separate provisions concerning: refund of duty or interest; interest on delayed refund under the refund provision; mandatory deposits for appeals; and interest on refund of the statutory appellate deposit. Treating all refundable amounts as falling under one interest regime can obscure these distinct statutory fields. 3. Key Issues / Provisions Nature of an investigation deposit The first issue was whether the amount paid during investigation ret....
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....y after expiry of the three-month period until refund. The Explanation to Section 27A deems an appellate or court order of refund against an order under Section 27(2) to be an order passed under Section 27(2) for this purpose. The provision is thus linked textually to a refund ordered under Section 27(2). Mandatory appellate deposit and Section 129EE Section 129E of the Customs Act, 1962 makes payment of a prescribed percentage of disputed duty or penalty a condition for entertainment of specified appeals. In the relevant categories, the provision requires a deposit of 7.5% or 10%, subject to a maximum of rupees ten crores. Section 129EE of the Customs Act, 1962 specifically concerns "Interest on delayed refund of amount deposit....
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....uling The Tribunal followed the jurisdictional High Court ruling extracted in the order. The ruling rejected the proposition that the 6% notification under Section 129EE supplied the interest rate for all delayed refunds. It drew a temporal and statutory distinction between an express statutory provision governing delayed refund of pre-deposit and a deposit made during investigation for which no statutory rate had been prescribed. The Tribunal held that a jurisdictional High Court's interpretation of the relevant legal question is binding on the Tribunal within that jurisdiction. It therefore concluded that the assessee was eligible for 12% interest on the investigation deposit and that the departmental order granting 6% interest ....
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..... On the materials considered in that case, it held that the refundable pre-deposit carried interest at 12% per annum. The decision illustrates the judicial approach that a deposit made to secure or pursue a challenge cannot be equated uncritically with final duty liability. 2002 (3) TMI 69 - HIGH COURT OF JUDICATURE AT KOLKATA addressed refund of a pre-deposit where no statutory interest rate was fixed. It held that the label "deposit" does not defeat entitlement to interest where governmental retention would result in unjust enrichment. The rate fixed there was 18% per annum, demonstrating that courts have historically adopted different compensatory rates in the absence of a governing statutory rate. The position differs where the p....
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.... Section 129EE. • Where Section 27 is invoked, the claim should address the one-year limitation, the exception for payments under protest, and the computation rule applicable where refund follows an appellate or judicial order. • Interest claims should identify the asserted statutory or restitutionary basis, the proposed commencement date, and the specific period of retention. The rate cannot be assumed solely from the existence of the 6% notification under Section 129EE. • Departmental authorities and litigants must apply the jurisdictional High Court's view on the classification and interest consequences of investigation deposits, unless displaced by a binding superior authority. 6. Key Takeaw....