2012 (9) TMI 1164 - HC - Income Tax

Summary

Issues Involved:
1. Treatment of the amount recovered as pre-deposit or duty.
2. Eligibility for refund and the requirement to file a refund claim u/s 27.
3. Applicability of the principle of unjust enrichment.
4. Interest rate applicable on the refunded amount.

Summary:

1. Treatment of the Amount Recovered as Pre-Deposit or Duty:
The appellant-Commissioner of Customs (Preventive) challenged the CESTAT's decision that the amount of Rs. 4,71,447/- recovered by appropriation of refund sanctioned to the respondent in other cases was to be considered as a pre-deposit made u/s 129E of the Customs Act, 1962. The Tribunal held that the amount recovered from the appellants by adjustment against the refunds has to be considered as pre-deposit made during the pendency of appeal. The High Court upheld this view, citing that depositing duty, interest, and penalty pending appeal is a statutory obligation and does not require a specific direction from the Commissioner (Appeals) or the Tribunal.

2. Eligibility for Refund and Requirement to File a Refund Claim u/s 27:
The Tribunal ruled that the respondent was not required to file a proper refund claim u/s 27 of the Act and satisfy the tests of unjust enrichment. The High Court supported this decision, noting that once the demand of duty was set aside, the amount adjusted out of the refund sanctioned against such demand was required to be returned suo motu. The Tribunal's decision was consistent with the view that the amount in question was in the nature of a pre-deposit and not duty, thus negating the need for a refund claim.

3. Applicability of the Principle of Unjust Enrichment:
The Tribunal did not find it necessary for the respondent to satisfy the tests of unjust enrichment for the refund of the pre-deposit amount. The High Court concurred, emphasizing that the amount was a pre-deposit and not duty, and therefore, the principle of unjust enrichment did not apply.

4. Interest Rate Applicable on the Refunded Amount:
The Tribunal directed the Department to refund the amount with 12% interest from 20th August, 1996, till the date of payment. The High Court upheld this direction, referencing the Supreme Court's decision in Commissioner of Central Excise, Hyderabad v. ITC Ltd., which supported the payment of 12% interest on delayed refunds of pre-deposits. The High Court found no infirmity in the Tribunal's order regarding the interest rate.

Conclusion:
The High Court dismissed the appeal, finding no substantial question of law warranting interference. The Tribunal's order was upheld, confirming that the amount recovered was a pre-deposit, not requiring a refund claim u/s 27, and the direction to pay 12% interest was in line with Supreme Court precedent.