Payments Made During Investigation Without SCN Do Not Constitute Payments Against Demand: CESTAT
The New Delhi Bench of Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) has stated that the payment made by the assessee during an investigation, without any Show Cause Notice, cannot be considered as payment against a demand raised by the Department without even going into the merits of the nature of demand.
The Bench of Dr. Rachna Gupta (Judicial Member) has observed 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.”
Section 129EE of the Customs Act, 1962 deals with interest on delayed refunds of amounts deposited under Section 129E. It states that if an amount deposited under Section 129E needs to be refunded, the assessee/appellant will be paid interest on the amount from the date of payment until the date of refund. The interest rate will be between 5% and 36% per year, as fixed by the Central Government.
A case of ineligible duty drawback was booked by DRI (HQ), New Delhi against the assessee/appellant. The assessee was forced to deposit ₹50,00,000 under threat of arrest. Later, the proceedings were dropped by the Adjudicating Authority. Thereafter, the assessee filed an application for claiming refund of amount in the office of Commissioner of the Customs, Delhi which was rejected.
Aggrieved by the Order passed by the Commissioner of the Customs, the assessee filed an Appeal before Commissioner (Appeals) which was allowed. Further, it was held that issue of interest is left open to be decided by refund sanctioning Authority. Thereafter, Assistant Commissioner of Customs (Refund) allowed the refund of Rs. 50,00,000/- but had not granted interest on the said amount.
Aggrieved by the same the assessee has filed appeal before Commissioner (Appeals), whereas the Commissioner has sanctioned the interest from date of deposit till date refund however, has ordered that interest is payable as applicable for delayed refund. Aggrieved on account of the rate of interest, the assessee has filed an appeal before the Tribunal challenging the order passed by the Commissioner (Appeals).
The assessee contended that the Central Government vide Circular No. 984/8/2014-CX., dated 16.09.2014 has made provisions for interest on the pre-deposited amount by as assessee. Any deposit in the hands of department has to be refunded with interest from the date of deposit in terms of Section 129EE of the Customs Act, 1962.
The department submitted that Commissioner (Appeals) has meticulously examined the issue and rather has sanctioned the interest though @ 6% (as was applicable) that too from the date of deposit. Hence there is no infirmity in the order.
The Tribunal observed that the 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 assessee and thus the said amount was never appropriated against any demand. There was no demand against the assessee and accordingly such collection of amounts was without authority of law.
The Tribunal found 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.
The Tribunal opined that “the payment made by the assessee 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, the assessee is eligible for refund of interest at the rate of 12%.”
The Tribunal while allowing the appeal held that the assessee 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.
Counsel for Appellant/ Assessee: Pramod Tiwari and Prachit Mahajan
Counsel for Respondent/ Department: Mahesh Bhardwaj
Case Title: M/s. Churchit International v. Commissioner of Customs (Export), New Delhi
Case Number: Customs Appeal No. 51301 of 2023 [SM]