M/s.Sreem Overseas Inc. vs Commissioner Of Customs (Imports-Sea Port)

Brief facts of the case are that the appellant filed shipping bill for export of dyed and / or printed fabrics made of polyester filament yarn / textures yarn with or without embroidery. The D.R.I initiated investigation against the appellant for over invoicing and consequent availment of DEPB. During the investigation, the appellant deposited Rs.25 lakhs. Show cause notice was issued alleging inter alia undue availment of DEPB. After adjudication, original authority dropped the proceedings vide order dt. 31.10.2017. Thereafter appellants filed a refund claim of Rs.25 lakhs on 04.01.2018. The refund sanctioning authority allowed the refund but however did not grant any interest. Aggrieved by the denial of interest appellants filed appeal before the Commissioner (Appeals). The department also filed cross objections in the said appeal. Vide order impugned herein the Commissioner (Appeals) set aside the sanction of refund holding that the said amount is paid as duty and that the refund ought to be considered under Section 27 of the Customs Act, 1962. Interest also was not granted. Aggrieved by such order, the appellant is now before the Tribunal.

2.1 On behalf of appellants, Ld. Counsel Ms. Y. Siri Reddy appeared and argued the matter. She adverted to the show cause notice to submit that it is mentioned therein that the appellant has deposited voluntarily Rs.25 lakhs and also to show cause why the same should not be appropriated towards the undue DEPB benefits availed by the appellant. It is clear from the SCN that the appellant has made the deposit during investigation and not towards any duty liability. The original authority after adjudication of the show cause notice had dropped the charges made against the appellant. Consequently, the appellant filed refund claim under Section 129E for the reason that there was no duty demand confirmed against the appellant and the amount of Rs.25 lakhs was a deposit made during the investigation. Commissioner (Appeals) has erred in holding that amount has been deposited towards duty liability.

2.2 Original authority correctly sanctioned the refund and department has not filed any appeal challenging the order passed by the original authority sanctioning refund of Rs. 25 lakhs. In the appeal filed by the appellant against denial of interest while granting the refund, the department has filed cross appeal. The only ground raised in cross appeal is as to from which date the interest has to be calculated. No further grounds with regard to sanction of refund was put forward by the department. It is also submitted by her that the department has so far not issued any SCN for recovery of erroneous refund. She relied upon the decision in the case of Lanvin Synthetics Pvt. Ltd. Vs CCE - 2020 (374) ELT 759 (Tri.-Mum.) to argue that when there is no demand confirmed and amount is deposited during the investigation, the same cannot attain the colour and character of duty element. She prayed for allowing the appeal.

Ld.A.R Shri S. Balakumar reiterated the findings in the impugned order.

Heard both sides.

At the outset, it has to be stated that department has not filed any appeal against the order passed by the original authority sanctioning the refund of Rs.25 lakhs. In the appeal filed by the appellant seeking relief of interest, Commissioner (Appeals) has gone to the extent of disallowing the refund that has been already granted. The department has no case that in the cross appeal filed by them they have challenged the sanction of refund. Even in the grounds of appeal by department extracted by the Commissioner (Appeals) in the impugned order, it is only seen stated that department is opposing grant of interest. On such score, the act of Commissioner (Appeals) in setting aside the order passed by the original authority sanctioning refund of Rs.25 lakhs is beyond the scope of appeal filed by the appellant.

It is seen from the SCN that the amount was voluntarily deposited during the investigation. When the adjudicating authority has dropped proceedings then there is no confirmation of demand against the appellant which would give the amount the character or colour of duty. The amount remains to be a deposit only. Therefore, the refund claim filed under Section 129E of the Customs Act is legal and proper. On these grounds, I hold that the order of the Commissioner (Appeals) setting aside the sanctioned refund is unjustified and requires to be set aside, which I hereby do.

The next issue is with regard to grant of interest. Needless to say that any deposit in the hands of department has to be refunded with interest from the date of deposit. Section 129EE which provides for granting of interest for delayed refund reads as under :

SECTION 129EE. Interest on delayed refund of amount deposited under section 129E. - Where an amount deposited by the appellant under section 129E is required to be refunded consequent upon the order of the appellate authority, there shall be paid to the appellant interest at such rate, not below five per cent. and not exceeding thirty-six per cent. per annum as is for the time being fixed by the Central Government, by notification in the Official Gazette, on such amount from the date of payment of the amount till, the date of refund of such amount :

Provided that the amount deposited under section 129E, prior to the commencement of the Finance (No.2) Act, 2014, shall continue to be governed by the provisions of section 129EE as it stood before the commencement of the said Act.

From the foregoing discussions, I am of the view that the appellant is eligible for interest on the amount deposited from the date of deposit till the date of payment. For the above reason, the impugned order is set aside. Appeal is allowed with consequential relief.

(Dictated and pronounced in open Court)