2010 (6) TMI 814 - HC - Customs

Summary

Issues Involved:
1. Refund of security deposit of Rs. 10 crores.
2. Payment of interest on the security deposit.
3. Unjust enrichment.

Issue-Wise Detailed Analysis:

1. Refund of Security Deposit of Rs. 10 Crores:

The petitioner, a company involved in offshore oil exploration, sought the return of a security deposit of Rs. 10 crores paid to the respondent. The deposit was made following the seizure of an oil rig by the customs authorities and pending an investigation. The petitioner had complied with the customs requirements by depositing Rs. 10 crores and providing a bond of Rs. 50 crores. Despite the Central Excise and Sales Tax Appellate Tribunal (CESTAT) setting aside the order of the Commissioner of Customs and directing the refund, the respondent delayed the refund. The Supreme Court also dismissed the respondent's appeal, yet the refund was not processed promptly. Eventually, the respondent refunded the principal amount of Rs. 10 crores during the pendency of the writ petition, but without interest.

2. Payment of Interest on the Security Deposit:

The petitioner claimed interest on the refunded amount from the date of deposit, citing deprivation of the right to use the money. The Court recognized that under Section 27A of the Customs Act, 1962, interest on delayed refunds is mandated if the refund is not processed within three months from the date of application. The Court noted that the respondent failed to act within the stipulated time frame and only refunded the principal amount after significant delay and multiple requests from the petitioner. The Court held that the petitioner was entitled to interest at 6% per annum from 9th October 2003 to 12th October 2006, failing which the interest rate would increase to 10% per annum from 16th August 2010 until full payment.

3. Unjust Enrichment:

The respondent raised the issue of unjust enrichment, arguing that the petitioner might have passed on the burden of the deposit to its customer, ONGC. The Court examined the legislative intent behind Sections 27 and 27A of the Customs Act, noting that the Assistant Commissioner or Deputy Commissioner of Customs must decide on refund applications within three months. The Court found that the respondent did not act on the petitioner's refund application within the required timeframe and did not provide any valid reason for the delay. The Court also noted that the Tribunal had already decided the issue of unjust enrichment in favor of the petitioner on 10th April 2006.

Conclusion:

The Court concluded that the respondent's delay in processing the refund and failure to pay interest was unjustified. The Court ordered the respondent to pay interest at 6% per annum on the Rs. 10 crores from 9th October 2003 to 12th October 2006, with an increased interest rate of 10% per annum from 16th August 2010 until full payment if not paid by 15th August 2010. The Court also awarded costs of Rs. 10,000 to the petitioner.