2006 (4) TMI 390 - AT - Customs

Refund claim - Unjust enrichment - Interest on delayed refund of pre-deposit - HELD THAT - We agree with the learned Consultant s submission (for the Respondent) that when the duty paid during the pendency of an appeal before the appellate authority is considered as deposit, there is no reason why the amount deposited during investigation cannot be considered as deposit. We also find that the decision of the Larger Bench in the case of Jayant Industries 2003 (5) TMI 81 - CEGAT, NEW DELHI has merged with the Apex Court s decision in the case of ITC 2004 (12) TMI 90 - SUPREME COURT . Hence, the bar of unjust enrichment would not be applicable even to the amounts deposited during investigations. The contentions raised by Revenue are not tenable. Hence, we do not want to interfere with the findings of the appellate authority. In the present case, the refund amount arose consequent to Commissioner of Customs order. Therefore, the refund in respect of this amount ought to have been paid within three months from 6-10-2003. Since it was not paid, interest at 12% p. a. with effect from the expiry of three months from 6-10-2003 has to be paid. This is the order of the Commissioner (A) and we have no reason to interfere with it. As regards, the amount in the other appeal before the Commissioner (A), the refund claim was originally filed even on 9-11-2001, therefore the provisions of Section 27A of the Customs Act are attracted. A careful reading of 27A reveals that the Respondent in the second refund claim are entitled for payment of interest from the date of expiry of three months from the date of refund claim as contended in the Cross Objection by the Respondent. Hence, we are inclined to allow the Cross Objection in respect of this refund claim. Thus, Revenue s appeals are dismissed and Respondent s Cross Objection is allowed.

Summary

Issues Involved:

1. Applicability of unjust enrichment to amounts deposited during the course of investigation.
2. Grant of interest for refund claimed by the Respondents.

Issue-wise Detailed Analysis:

1. Applicability of Unjust Enrichment:

The Revenue contended that the amounts deposited by the Respondents during the investigation were towards probable differential duty and not pre-deposit for availing the right of appeal. Therefore, the bar of unjust enrichment under Section 127(2)(a) of the Customs Act, 1962, should apply. The Commissioner (A) had relied on the decision in the case of Indian Thermoplastics (P) Ltd. v. CC, Kandla, which stated that amounts collected during investigation cannot be treated as duty paid for the purpose of Section 27 of the Customs Act, 1962, and thus, the bar of unjust enrichment was not applicable. However, the Revenue argued that this view is no longer sustainable in light of the Apex Court decision in Sahakari Khand Udyog Mandal Ltd. v. CCE, which did not distinguish between duty and deposit. The Respondents maintained that the amounts deposited were not passed on to customers, as certified by a Chartered Accountant, and thus, the bar of unjust enrichment should not apply.

The Tribunal agreed with the Respondent's argument that amounts deposited during investigation should be treated as deposits, similar to pre-deposits made during the pendency of an appeal. Therefore, the bar of unjust enrichment would not be applicable to these amounts.

2. Grant of Interest for Refund Claimed by the Respondents:

The Commissioner (A) had ordered the payment of interest from the expiry of three months from the date of the order of adjudication. The Revenue argued that this was improper as the refund was credited to the Consumer Welfare Fund due to the Respondent's failure to provide evidence against unjust enrichment. The Respondents cited the Supreme Court judgment in the ITC case and the Board's Circular dated 8-12-2004, which supported the grant of interest on deposits made during the investigation.

The Tribunal found that the amounts were indeed deposits and not duty. Therefore, as per the Board's Circular dated 8-12-2004, the amounts due should be refunded within three months of the disposal of the appeals in the assessee's favor. Interest at 12% per annum was applicable from the expiry of three months from the date of the Commissioner of Customs' order. For the second refund claim, the Tribunal applied Section 27A of the Customs Act, which entitles the Respondents to interest from the date of expiry of three months from the date of the refund claim.

Conclusion:

The Tribunal dismissed the Revenue's appeals and allowed the Respondent's Cross Objection, confirming that the amounts deposited during the investigation were to be treated as deposits, not duty, and thus, the bar of unjust enrichment was not applicable. Interest was to be paid from the expiry of three months from the date of the refund claim as per Section 27A of the Customs Act.