2024 (9) TMI 418 - AT - Customs

Refund of amount of interest paid on the amount collected during course of investigation which was paid much before issuance of Show cause Notice - interest on refund - rate of interest. Refund of amount of interest paid on the amount collected during course of investigation which was paid much before issuance of Show cause Notice - HELD THAT - It is worth noting that amount of Rs.50,00,000/- was deposited much before issuance of show cause notice and adjudication order did not confirm any demand against the appellant and thus the said amount was never appropriated against any demand. There was no demand against the appellant and accordingly such collection of amount was without authority of law. From the decision in Parle Agro Pvt. Ltd. 2017 (2) TMI 984 - CESTAT ALLAHABAD and Omjai Bhavani Silk Mils (P) Ltd. 2009 (2) TMI 321 - CESTAT, BANGALORE it is clear that any amount received during investigation is Revenue Deposit hence cannot be retained for want of any authority of law to retain such amount. Unless there is valid demand against the depositor, it must be refunded with interest from the date it was wrongly collected. Interest on refund - HELD THAT - Section 11B and 11BB of Central Excise Act will not be applicable to the amount in question. The assessee is entitled for interest on the amount deposited during investigation. Otherwise also, as per the Article 300A of Constitution of India also, no person shall be deprived of his property, save by authority of law. Once the demand proposed under five show cause notices is set aside, it becomes clear that the money deposited continues to be the appellant's property. He cannot be deprived of the same and is entitled for benefits arising out of said property. Hence interest accrued on the amount in question during the period it was in fixed deposit is the property of the owner of the amount i.e. the appellant herein. It was otherwise, involuntary deposited - the appellants are entitled to claim the interest on the amount as has been refunded in their favour that too to be paid from the date of payment of initial amount till the date of its refund. Rate of Interest - HELD THAT - This Tribunal in the case of M/s. Parle Agro Pvt. Ltd. Vs. Commissioner, Central Goods Service Tax, Noida (vice- Versa) 2017 (2) TMI 984 - CESTAT ALLAHABAD has held that in the light of the above discussed notifications the grant of interest at the rate of 12% per annum seems to be appropriate. Thus, the payment made by the appellant at the time of investigation, in absence of any SCN for the same, cannot be held to be the payment against the demand raised by the Department without even going into the merits of the nature of demand. Though no notification, if any, is brought to notice by the department, irrespective, in view of the decisions of Hon ble Supreme Court and others, the appellant is eligible for refund of interest at the rate of 12%. The findings of the order under challenge are upheld with respect to holding appellant entitled for getting refund of the amount along with interest. However, it is held that the appellant is entitled to have interest on the amount of refund sanctioned at the rate of 12% per annum to be calculated from the date of the deposit of the amount till the date refund thereof. Appeal allowed.

Issues Involved:
1. Refund of the amount of interest paid on the amount collected during the investigation.
2. Rate of interest applicable for the refund.

Detailed Analysis:

1. Refund of the Amount of Interest Paid:

The primary issue in this case pertains to the refund of the amount of interest paid on the amount collected during the investigation, which was paid before the issuance of the Show Cause Notice (SCN). The principal amount was refunded since no demand was confirmed against the appellant. However, the issue of the refund of the amount of interest was left open to be decided by the refund sanctioning authority.

The appellant was made to deposit Rs. 50,00,000/- involuntarily under the threat of arrest during the investigation on 18.03.2014. The proceedings initiated via five SCNs were dropped by the common Adjudicating Authority on 14.10.2019. The appellant then filed an application for claiming a refund of the Rs. 50,00,000/- on 22.01.2020. The Assistant Commissioner of Customs rejected the refund claim for want of the Original TR-6 Challan. The Commissioner (Appeals) set aside this rejection, holding that the issue of interest was to be decided by the refund sanctioning authority.

The Assistant Commissioner of Customs (Refund) later allowed the refund of Rs. 50,00,000/- but did not grant interest on the said amount. The Commissioner (Appeals) sanctioned the interest from the date of deposit till the date of refund, as applicable for delayed refund.

2. Rate of Interest Applicable for the Refund:

The appellant contested the rate of interest sanctioned by the Commissioner (Appeals), arguing that the interest should be at a higher rate. The Commissioner (Appeals) directed the refund sanctioning authority to allow payment of interest from the date of deposit till the final payment was made with applicable rates of interest for delayed refunds.

The appellant cited various decisions and provisions, including Section 129EE of the Customs Act, 1962, and the Central Government's Circular No. 984/8/2014-CX., dated 16.09.2014, which provides for interest on pre-deposited amounts. The appellant argued that any deposit in the hands of the department has to be refunded with interest from the date of deposit.

The Tribunal noted that the amount of Rs. 50,00,000/- was deposited before the issuance of the SCN and that the adjudication order did not confirm any demand against the appellant. Therefore, the collection of the amount was without the authority of law, and the amount should be treated as a deposit. The Tribunal relied on several decisions, including Parle Agro Pvt. Ltd. and Omjai Bhavani Silk Mills (P) Ltd., which held that such amounts collected during investigations are revenue deposits and must be refunded with interest from the date they were wrongly collected.

The Tribunal also referred to the Supreme Court's decision in Kuil Fireworks Industries, which ordered pre-deposits to be returned with 12% interest since the demand raised was quashed. The Tribunal observed that the rate of interest varies from 6% to 18%, subject to notification.

The Tribunal concluded that the appellant is entitled to interest at the rate of 12% per annum on the refunded amount, to be calculated from the date of deposit till the date of refund. This decision aligns with the Tribunal's previous rulings in similar cases, such as Duggar Fibre Pvt. Ltd. and Emmar Mgf Construction Pvt. Ltd.

Conclusion:

The Tribunal upheld the findings of the order under challenge, confirming the appellant's entitlement to a refund of the amount along with interest. However, it held that the appellant is entitled to interest at the rate of 12% per annum, calculated from the date of the deposit until the date of refund. The present appeal was allowed, and the order was pronounced in the open court on 06.09.2024.

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