Whether interest admissible for delayed payment of refund even in case of amount paid under protest ?

PJ/Case law/2014-15/2243

Case:- RATAN UDYOG VERSUS COMMISSIONER OF CUSTOMS (IMPORT), MUMBAI

Citation:- 2014 (299) E.L.T. 374 (Tri.- Mumbai)

Brief fact:- The appeal arises from Order-in-Appeal No. 255(CRC-1)/2012(JNCH)/Imp-245, dated 8-5-2013 passed by the Commissioner of Central Excise (Appeals), Mumbai-11, JNCH.
The appellant, M/s. Ratan Udyog, Kolkata filed shipping bill No. 2424, dated 21-9-2004 for export of ladies nighties as woven fabrics. Subsequently, he filed another shipping bill declaring the goods correctly under claim for drawback. The case was adjudicated and the goods were confiscated but the appellant was allowed to redeem the goods on payment of fine of Rs.4 lakhs and penalty of Rs.1 lakh vide order dated 11-11-1994. The appellant made the payment of fine and penalty but contested the same before this Tribunal and this Tribunal vide Order No. C11/639/W20/2001, dated 12-3-2001 [(2001 (134) E.L.T. 449 (Tri.- Mum-)] set aside the confiscation as well as redemption fine and the penalty was reduced from Rs. 1 lakh to 10,000/-. Consequent to the Tribunal's order, the Asstt. Commissioner of Customs allowed refund of redemption fine and penalty amounting to 4,90,000/- vide, order dated 29-9.2008. The department was aggrieved of the same and they filed an appeal before the lower appellate authority on the ground of non-examination of unjust enrichment while sanctioning of the refund by the Asstt. Commissioner and the lower appellate authority vide order dated 11-8-2001 allowed the department's appeal. The appellant filed an appeal before this Tribunal once again and vide Order No. A/646/2010/SMB/C-IV, dated 16-11-2010 held that principle of unjust enrichment would not apply to redemption fine and penalty and set aside the order of the Commissioner (Appeals). Consequently, the adjudicating authority vide order dated 9-6-2011 sanctioned the refund of fine and penalty but rejected the claim for interest on the said amount. The appellant challenged the said order before the lower appellate authority, who vide the impugned order has dismissed the appeal. Hence the appellant is before Tribunal.

Appellant’s contention:- The learned counsel for the appellant makes the following submissions.
In the first appeal before this Tribunal, vide Appeal No. C/52/1995 the appellant had prayed for refund of fine and penalty along with interest thereon and this Tribunal had allowed the appeal which would imply that the plea for refund of the amounts paid as pre-deposit along with interest was allowed. The said decision became final and was not challenged by the Revenue before any other appellate authority.
Similarly, when the matter was once again adjudicated by the Tribunal in the second round of litigation, the Tribunal vide order dated 16-11-2010 had allowed the appeal. Thus, the plea of the appellant for allowing interest already stands approved by the Tribunal and, therefore, the same cannot be denied by the lower authorities.
The appellant also submits that as per Section 129EE of the Customs Act, 1962, interest on delayed refund of the amount deposited under the proviso to Section 129E is permissible at the rate specified in Section 27A of the Customs Act, after the expiry of three months from the date of communication of the order of the appellate authority till the date of refund of such amount. In the present case the appellant has been granted refund by the jurisdictional Asstt. Commissioner vide order dated 29-9-2008. However, refund was actually paid to the appellant only oh 9-6-2011 and, therefore, the appellant is eligible for interest under Section 129E as the amount paid by them prior to the confirmation of the demand is only a pre-deposit. The learned counsel also relies on the decision of the Hon'ble High Court of Bombay in the case of Suvidhe Ltd. v. Union of India - 1996 (82) E.L.T. 177 (Bom.) wherein the High Court ordered payment of interest in respect of pre-deposit made under Section 35F of the Central Excises & Salt Act, 1944. He also relies on the decision of this Tribunal in the case of PAC Systems Pvt. Ltd. v. Commissioner of Customs, Mumbai - 2003 (159) E.L.T. 568 wherein the Tribunal awarded interest on refund of penalty amount of Rs. 20,000/-due to the assessee in consequence of the orders passed on 15.3-1998 but paid only on 5-10-2002. He also refers to the Circular No. 802/35/2004-CX, dated 8-12-2004 issued by the Central Board of Excise and Customs wherein the Board had clarified that pre-deposit must be returned within three months from the date of order passed by the appellate Tribunal or the Court unless there is a stay on the order by a superior Court and if the amount is not refunded within the period of three months the matter will be viewed adversely and default, if any, entail interest liability.

Respondent’s contention:- The Dy. Commissioner appearing for the Revenue reiterates the findings of the lower appellate authority.

Reasoning of judgment:-After hearing both the sides and perusing the records and submissions, it is finally decided at the point that in the present case, the refund become due to the appellant vide order dated 12-3-2001 passed by this Tribunal and the refund was also granted to the appellant vide order dated 29-9-2008 passed by the Asstt. Commissioner of Customs. However, payment of the refund was not made due to dispute in this regard raised by the department and the same was settled against the Revenue and in favour of the appellant vide order dated 16-11-2010 and, thereafter, the refund was paid to the appellant on 9-6-2011. Therefore, the amount deposited by the appellant under protest, which was not challenged, is liable to be returned to the appellant along with interest w.e.f. 29-9-2008. Accordingly, the appellant would be entitled for the benefit of interest prescribed under Section 27A of the Customs Act, 1962 for the period 29-9-2008 to 9-6-2011 and they hold accordingly. The decision relied upon by the appellant in the cases cited supra also supports the above view. The department is directed forthwith to pay interest due to the appellant for the period from 29-9-2008 to 9-6-2011.

Decision:- Appeal allowed.

Comment:- The crux of this case is that pre-deposit if ordered to be refunded must be returned within three months from the date of order passed by the appellate Tribunal or the Court unless there is a stay on the order by a superior Court and if the amount is not refunded within the period of three months, interest liability will arise on the same. One more analogy that is drawn from this case is that the principle of unjust enrichment is not applicable for refund of pre-deposit.

Prepared by: Kushal Shah

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PJ/Case law/2014-15/2243

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