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TMI BlogNON-RENEWAL OF FIXED DEPOSITS ARISING OUT OF SEIZED CASHX X X X Extracts X X X X X X X X Extracts X X X X ..... NON-RENEWAL OF FIXED DEPOSITS ARISING OUT OF SEIZED CASH - By: - Mr. M. GOVINDARAJAN - Central Excise - Dated:- 27-9-2024 - In RAMKARAN KARWA, AND SAMIR KARWA. VERSUS UNION OF INDIA, THE COMMISSIONER, CGST CX, PALGHAR, THE ASSISTANT COMMISSIONER, CGST CX, PALGHAR DIVISION-III, THE ADDITIONAL DIRECTOR GENERAL, DIRECTORATE GENERAL OF GST INTELLIGENCE, MUMBAI ZONAL UNIT MUMBAI. - 2024 (9) TMI 1356 - BOMBAY HIGH COURT , an investigation was carried out by Intelligence wing, respondent No. 4 against Perfect Containers Private Limited. A sum of Rs.2.06 crore from the residence of the petitioner. It was alleged that the said amount constituted unaccounted receipts arising out of sales made by Perfect Containers Private Limited. A sum of Rs.15.94 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lakhs was also recovered from the premises of the petitioner s son. The seized amount was deposited by the respondent No. 4 in fixed deposit with Punjab and Sindh Bank. On 19.05.2016 the order-in-original was passed in which it was held that the cash seized was liable for confiscation. A penalty of Rs.21.25 lakhs was also imposed on the petitioner. Against this order the petitioner and respondents filed cross appeals before the Commissioner (Appeals). The First Appellate Authority, vide their order dated 31.03.2017, set aside the order of confiscation of cash seized and also penalty imposed on the petitioner. The Department filed appeal before the Tribunal which upheld the order of the First Appellate Authority. No appeal was filed against ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the order of the Tribunal. Therefore, the said order attained finality. The petitioner filed an application with the department to refund the cash seized from him and also from his son. The Department refused to refund the said amounts on 21.05.2018 on the ground that the case was pending before the Tribunal. The petitioner filed an appeal before the Commissioner (Appeals) against the refusal order to refund the amount. The First Appellate Authority, vide their order dated 23.01.2019 directed the department to process the refund claim since there was no stay order on the appellate order. The petitioner, later on three occasions, requested for the refund of Rs.2.06 crore along with 18% of interest per annum. A misc. application was filed by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the petitioner, before the Tribunal for refund of cash seized with 18% interest per annum. The Tribunal, vide their order dated 05.07.2024 ordered for the refund of seized cash along with interest @ 6% from the date of deposit to the date of refund. The said refund with 6% of tax is in accordance with the circular issued by the Department on 16.09.2014. The petitioner challenged the said order granting 6% interest on refund before the High Court. The petitioner prayed for the grant of 18% interest instead of 6%. The petitioner submitted the following before the High Court- The circular dated 16.09.2014 is applicable to the pre deposit made under Section 35F of Central Excise Act and Section 129EE of the Customs Act and not applicable to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... refund of cash seized. The cash was seized during the year 2011. Therefore, the circular dated 16.09.2014 is not applicable to his case. The Department was not justified to refund the cash since no stay order on the appellate order which is in favor of the petitioner. The petitioner is entitled to 18% of interest being the commercial rate of interest. The Department earned interest on fixed deposits more than 6%. The petitioner is entitled for the entire amount of interest given to the fixed deposits. The Department submitted the following before the High Court- Interest was correctly given @ 6% as per the circular dated 16.09.2014. There was no delay in refunding the cash seized since the Department filed appeal. The High Court considered ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the submissions of the parties to the present writ petition and also analyzed the facts of the case. The High Court observed that the contention of the department is justification for grant of interest @6% per annum is based on Circular No.984 dated 16.09.2014. The said circular is not applicable to this case since in this case the cash was seized during search proceedings and it is not a pre deposit for filing an appeal. The cash was seized during the year 2011 and therefore appropriation of cash seized during investigation towards any pre-deposit as a condition for filing an appeal also cannot arise. Further the petitioner has not brought any provision to justify its claim of interest @ 18%. Therefore, the prayer of the petitioner is rej ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ected. However, the claim of the petitioner for his entitled to receive the interest given to the fixed deposit made out of the cash seized from his premises is to be considered. The Fixed deposits earned 9.6% interest which is more than 6% interest awarded by the Department. The Department is the trustee for the amount seized from the petitioner s premises, till the determination of liability. The trustee cannot enrich himself on behalf of the person for whom the money is held in trust. The High Court held that the Department is duty bound to refund the entire amount of interest they got from the bank on account of fixed deposit. The cash seized from the petitioner and his son are Rs.2.06 crores and Rs.15.94 lakhs respectively. The petitio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ner and his son are eligible for an amount of Rs.97.03 lakhs which is the actual interest earned on fixed deposits. The petitioner also pointed out the discrepancy in the interest calculation. The petitioner pointed out that the interest earned for the period from 04.01.2021 to 03.03.2022 is Rs.5,98,217/- whereas the interest in the previous year is Rs.25,04,477/-. Similarly, for the period 03.01.2013 to 03.01.2014, interest @9% is worked out to Rs.23,44,222/- whereas at the same rate of interest for the immediately subsequent year the interest earned is shown at Rs.20,53,017/-. The difference of Rs.2,91,205/- is also not explained. Petitioner submitted and rightly so that the said discrepancies have not been explained by the Department. Re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... garding the lesser interest the Department, after having consultation with the bank, stated that there were regulations governing banking system whereby auto-renewal gets inactivated after a period of 10 years and therefore no interest is shown to have been earned on the fixed deposit. The petitioner cannot be penalized for the failure of non-renewal of fixed deposits. The High Court directed the department to initiate an inquiry to fix the responsibility on the officials who failed to renew the deposits in time. The High Court quashed the impugned order. The High Court directed the department to refund the eligible amount to the petitioner and his son. - Scholarly articles for knowledge sharing authors experts professionals Tax Manageme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt India - taxmanagementindia - taxmanagement - taxmanagementindia.com - TMI - TaxTMI - TMITax ..... 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