2021 (2) TMI 210 - HC - Customs

Refund claim of market value of gold - petitioner submitted that the department ought to have reimbursed the entire market value of the gold on the date of the application for release and could not have tendered only the original sum notionally realised by the department upon disposal of the gold in the year 2007 - HELD THAT - The order of confiscation of seized gold bars passed by the competent authority as confirmed by the Appellate Commissioner was reversed by the CESTAT. However as per the department the gold bars were already deposited with the Central Government Mint along with other quantity of gold seized and which had vested in the Government upon the confiscation orders becoming final. This happened on 20th November 2007. Through such transfer the Customs Department had realized the sum of Rs. 8, 07, 033/- which it offered to refund to the petitioner when the final judgment of the Tribunal was delivered. According to the Customs Department when the gold was disposed of the order passed by the Appellate Commissioner held the field and the department did not have any intimation of the petitioner s further appeal before the CESTAT. The petitioner has not disputed this averment of the department made in the order-in-original passed by the Assistant Commissioner on 08.09.2016 as well as in the affidavit-in-reply filed in the present petition. Thus after having waited for the period of limitation for filing appeal against the order of the Appellate Commissioner the department proceeded to dispose of the confiscated goods. No procedure for disposal of such confiscated goods has been brought to our notice by either side. When thus upon expiry of the period of limitation for filing appeal against the order of Appellate Commissioner the confiscation had achieved finality and in terms of Section 26 of the Customs Act the goods vested in the Central Government in absence of any statutory provision requiring in prior notice to the petitioner before disposal of the goods the action of the department cannot be faulted. However when the order of the competent authority and the Appellate Commissioner were reversed by the Tribunal the petitioner had to be restored to the original position as closely as possible. The action of the department to offer to the petitioner the value of the gold as on 20th November 2007 without any further interest nearly 9 (nine) years later cannot be approved. The petitioner therefore must receive the said principal sum of Rs. 8, 07, 033/- with interest - Here is the case where the departmental action of confiscation of seized goods came to be set aside by the CESTAT but by the time the Tribunal passed such an order the goods were already disposed of. The petitioner therefore can claim reasonable interest on such principal sum which must be refunded to him. While not accepting the claim of the petitioner for granting him the market value of the gold on the date of application made by him to the department it is provided that the said principal sum of Rs. 8, 07, 033/- will be paid to the petitioner along with simple interest @ 7.5% per annum from 20th November 2007 (i.e. the date on which the valuation of the gold for the purpose of refund is carried out) till actual payment of the principal sum by the department. This amount shall be released within a period of 3 (three) months from today - Petition disposed off.

Summary

Issues:
1. Refund claim of market value of gold seized by Customs Authorities.
2. Disposal of seized gold before final judgment by CESTAT.
3. Department's offer of refund without interest after Tribunal's order.
4. Petitioner's claim for interest on principal sum.

Issue 1: Refund claim of market value of gold seized by Customs Authorities

The petitioner sought a refund of Rs. 22,48,675, representing the market value of 817 gm of gold seized by Customs Authorities. The gold was seized from another individual but was claimed by the petitioner, leading to confiscation proceedings. The Customs Authorities initiated proceedings resulting in an order of confiscation, which was later appealed by the petitioner. The CESTAT allowed the appeal on 18.04.2016, stating that the petitioner had proved the gold's licit acquisition. The petitioner applied for a refund on 27.06.2016, as the confiscation order was no longer valid post-CESTAT's decision.

Issue 2: Disposal of seized gold before final judgment by CESTAT

The Assistant Commissioner of Customs sanctioned a refund of Rs. 8,07,033 to the petitioner based on the disposal of the gold in 2007, as there was no record of pending appeal against the seizure case at the time of disposal. The petitioner received the refund amount under protest and challenged the decision. The department justified the disposal, stating that the confiscation order had achieved finality before the CESTAT's judgment, and the gold had already vested in the Central Government. The department proceeded with disposal as per internal directives, claiming no intimation of the petitioner's appeal before CESTAT.

Issue 3: Department's offer of refund without interest after Tribunal's order

The Court acknowledged that the department's offer of refund without interest nearly nine years later was not appropriate. Despite the finality of the confiscation order before the CESTAT's decision, the petitioner was entitled to the principal sum of Rs. 8,07,033 with interest. The Court found the department's action of not offering interest on the principal sum post-Tribunal's order unjust, considering the reversal of the competent authority and Appellate Commissioner's decision.

Issue 4: Petitioner's claim for interest on principal sum

The Court ruled that the petitioner was entitled to simple interest at 7.5% per annum on the principal sum of Rs. 8,07,033 from the date of valuation of the gold (20th November, 2007) until the actual payment by the department. The Court directed the department to release the principal sum along with interest within three months from the judgment date, emphasizing the need to restore the petitioner to the original position as closely as possible post-Tribunal's decision.

In conclusion, the Court disposed of the petition by ordering the department to pay the principal sum with interest to the petitioner within three months, recognizing the petitioner's entitlement to interest on the principal sum post-Tribunal's decision, despite the finality of the confiscation order before the CESTAT's judgment.