2007 (11) TMI 318 - HC - Customs

Interest on refund of pre-deposit - Rate of interest - Held that - the contention of the respondents that the interest payable would be 8% cannot be accepted - The petitioners are entitled to interest at the rate of 12% on the principal amount of pre-deposit as also the interest on the amount deposited in the Court, if the amount was invested.

Summary

Issues:
1. Entitlement to interest on pre-deposited amount as per circular dated 8th December, 2004.
2. Interpretation of Supreme Court judgment on refund of duty with statutory interest.
3. Applicability of interest rate under Section 27A of the Customs Act.
4. Treatment of pre-deposit as distinct from duty.
5. Determination of interest rate on pre-deposit as per CBEC Circular.
6. Resolution of conflicting contentions regarding interest rate on pre-deposit.

Analysis:

1. The petitioner sought a mandamus to direct the Respondents to repay the pre-deposited amount with interest as per the Board's circular. An interim order was issued for the deposit of a specified amount with interest, which was subsequently complied with by the respondent.

2. The respondents argued that the petitioner is entitled only to statutory interest based on a Supreme Court judgment regarding refund of duty. However, an Appeal filed by the petitioners before the Supreme Court was allowed, indicating a different outcome.

3. Reference was made to Section 27A of the Customs Act to assert that the interest payable was 8% per annum at the relevant time, contrary to the 12% interest rate claimed by the petitioner. The contention was that the petitioner should only receive the principal amount along with 8% interest.

4. The Central Board of Excise and Customs treated pre-deposit as distinct from duty in a notification, and a Supreme Court judgment highlighted the provision of 12% interest on pre-deposit amounts in cases of delay in refund.

5. The judgment in the case of ITC Limited was cited to support the argument that interest on pre-deposit should be at the rate of 12%, as accepted by the Supreme Court in the mentioned draft circular.

6. The Court concluded that the interest payable on the pre-deposit should indeed be at the rate of 12%, rejecting the contention for 8% interest. The petition was made absolute in favor of the petitioner, entitling them to 12% interest on the principal pre-deposit amount and the amount deposited in court.