By TIOL News Service

MUMBAI, APRIL 18, 2013: IN a case relating to imports under DEEC scheme, the appellant had made a pre-deposit of Rs. 7.5 lakhs in cash and Rs. 40 lakhs as bank guarantee, as a transferee of the DEEC licence by M/s. Betul Oil & Flours Ltd. (BOFL) . The said amount was appropriated by the department towards redemption fine and penalty vide order dated 30/06/2003. The said decision was appealed against before the CESTAT and the Bench vide order dated 12/03/2007 set aside the said order and allowed the appeal.

The department did not prefer any appeal against the order of the Tribunal which became final.

Consequently, the appellant became eligible for refund of Rs. 47.5 lakhs which was allowed by the adjudicating authority but credited to the Consumer Welfare Fund on the ground that the appellant allegedly did not fulfill the condition of unjust enrichment.

Their appeal was rejected by the Commissioner(A) and so the appellant is before the CESTAT in the second round of proceedings.

It is submitted that –

+ the amount of Rs. 7.5 lakhs in cash and bank guarantee for Rs.40 lakhs was only a pre-deposit and the same was appropriated towards fine and penalty and to which the principles of unjust enrichment do not apply.

+ Following decisions are inter alia relied upon in support - Umax Enterprises [2009-TIOL-1799-CESTAT-MUM] and United Spirits Ltd. CC, Mumbai [2009-TIOL-316-HC-MUM-CUS]. It is also submitted that that the transferor of the licence BOFL has been allowed to withdraw the pre-deposit of Rs. One Crore made by them as per the directions of the Bombay High Court and, therefore, the transferee should be entitled for similar relief.

The Revenue representative relied on the decision in Sahakari Khand Udyog Mandal Ltd. 2005-TIOL-48-SC-CX-LB , and submitted that the principle of unjust enrichment would apply to all kinds of refunds, and since the appellant has not submitted any evidence to the effect that they have not passed on the burden of fine and penalty to their customers, the order of the lower authority is proper in law.

The Bench extracted the provisions of section 28D of the Customs Act, 1962 and observed that the section talks of refund of duty whereas in the present appeal the matter concerns refund of pre-deposit.

After narrating the facts involved in the Supreme Court decision in Sahakari Khand Udyog Mandal Ltd.(supra), the Bench noted –

“In the case before us, the facts are quite distinct and distinguishable. In the present case the appellant made a pre-deposit which was later on appropriated towards fine and penalty. Later on when the fine and penalty were set aside, the appellant became eligible for refund. Therefore, we are of the considered view that the ratio of the decision of the hon'ble apex court has no relevance to the facts in the present case.”

The Bench then proceeded to extract paragraph 28 of the High Court decision in United Spirits and held -

“5.4 In our considered view the ratio of the above decision applies to the facts of the present case. Accordingly we hold that the appellant is entitled for refund of Rs. 47.5 lakhs (adjusted towards fine and penalty which were subsequently set aside) along with interest thereon in accordance with law.”

In fine, the appeal was allowed with consequential relief.

In passing : Six years and counting…now…for some interest!

( See 2013-TIOL-622-CESTAT-MUM)