2019 (6) TMI 333 - AT - Customs

Interest on pre-deposit - payment of duty after reversal of duty debited in DEPB scrips is pre-deposit OR duty payment - Section 129E of the Customs Act, 1962 - HELD THAT - Section 129E required the appellant to deposit, pending an appeal, the entire amount of duty or interest demanded or penalty levied. In cases where the appellant files a stay application, the CESTAT often grants either complete waiver of pre-deposit or a partial waiver thereof. In case of partial waiver the appellant deposits some amount as directed by the CESTAT. It is the case of the first appellate authority that only when such application is made and part of the payment is made in pursuance of the stay order it can be called as pre-deposit. Where the entire amount of duty demanded is paid, it is the duty and not pre-deposit. A plain reading of section 129E does not say so. In fact, there cannot be any duty at all when the issue had not yet reached finality. Pending an appeal before the CESTAT the appellant deposited the entire amount under section 129E which is nothing but pre-deposit of the duty paid. Consequently, the interest, as applicable on pre-deposit, needs to be paid to the appellant. Appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Refund of pre-deposit amount and penalty sought by the appellant.
2. Interpretation of Section 129E of the Customs Act, 1962 regarding deposit requirements pending appeal.

Analysis:
1. The appeal was filed against an Order-in-Appeal seeking recovery of customs duty debited in DEPB scrips due to fraudulent activities by exporters. The appellant imported goods using these licenses and faced penalties. The appellant appealed, and the Final Order allowed their appeal with relief. Subsequently, they sought a refund of the pre-deposit amount and penalty paid. The Asst. Commissioner, following CBEC circulars, allowed the refund as it was not a duty payment but a pre-deposit for appeal, in compliance with Section 129E of the Customs Act, 1962. The appellant's claim was based on Circular No: 984/8/2014-CX clarifying the refund process for pre-deposits made in cash, which was accepted by the department and achieved finality.

2. The department appealed against the refund decision, arguing that the amount paid was not a pre-deposit but the entire duty demanded. The first appellate authority held that the provisions for interest and refund applied to pre-deposits only, not the entire duty amount. They differentiated pre-deposit as an amount paid based on a CESTAT stay application directive. However, the Tribunal disagreed, citing Section 129E, which requires the deposit of the entire duty demanded pending appeal. The Tribunal clarified that the duty paid before finality of the issue is essentially a pre-deposit, entitling the appellant to interest on the amount. The first appellate authority's decision was deemed incorrect, and the appeal was allowed, setting aside the impugned order with consequential relief.

This judgment clarifies the distinction between pre-deposit and duty payment under Section 129E of the Customs Act, 1962, emphasizing that the deposit of the entire duty demanded pending appeal qualifies as a pre-deposit, entitling the appellant to interest. The decision ensures compliance with statutory provisions and established circulars, providing relief to the appellant in seeking a refund of the pre-deposit amount and penalty paid during the appeal process.