Differential Duty Paid For Provisional Release Not Pre-Deposit; Only 6% Refund Interest Payable Under Section 27A Customs Act: CESTAT New Delhi
Pranav B Prem
The Customs, Excise & Service Tax Appellate Tribunal (CESTAT), Principal Bench, New Delhi, presided over by Dr. Rachna Gupta (Judicial Member), has ruled that the differential duty paid for provisional release of seized goods cannot be treated as a pre-deposit, and consequently, refund interest is payable only at 6% under Section 27A of the Customs Act, 1962, and not at 12% under Section 35FF of the Central Excise Act, 1994.
Also Read: CESTAT: FOB Value Fixed Between Exporter And Buyer Protected By Privity Of Contract; Customs Authorities Cannot Alter Declared Value
M/s Vortex Rubber Industries Pvt. Ltd., engaged in the import of Chinese tyres of the brands “Infinity” and “Wanli,” was investigated for alleged evasion and improper valuation. During a search on July 16, 2014, the authorities seized goods that lacked Mandatory Retail Price (MRP) stickers, a requirement for availing exemption from Special Additional Duty (SAD) under Notification No. 21/2012-Cus., dated 17.03.2012. Subsequently, the importer also filed Bill of Entry No. 6224101 dated 24.07.2014 for the import of truck tyres and flaps, which were similarly detained for valuation issues and non-compliance with labeling requirements. On the company’s request, the seized goods were provisionally released upon furnishing bonds, a bank guarantee, and payment of 100% differential duty—₹3,83,645 for the seized goods and ₹3,94,331 for the goods under the Bill of Entry.
The adjudicating authority later confirmed the duty demand and appropriated the differential duty. However, upon appeal, the CESTAT, by Final Order No. 50063-50066/2020 dated 09.01.2020, set aside the order and directed consequential relief. Following this, the appellant sought refunds, which were sanctioned in May and June 2021, but without interest. Aggrieved by the denial of higher interest, the appellant again approached the Tribunal.
Appellant’s Contentions
The appellant contended that the amounts paid for provisional release were in the nature of pre-deposits and not duties. Accordingly, it claimed entitlement to interest at 12% under Section 35FF of the Central Excise Act, 1994, from the date of deposit till refund, relying on Sony Pictures Network India Ltd. (2017) and Duggar Fibre Pvt. Ltd. (2021).
Revenue’s Submissions
The Revenue countered that the payments were clearly made for provisional release under the Customs Act, not as pre-deposits. It argued that the refund interest was governed exclusively by Section 27A of the Customs Act, under which interest accrues after three months from the date of filing the refund application. Relying on Ranbaxy Laboratories Ltd. v. Union of India (2011), the department maintained that the appellant had already been paid interest at 6%, the rate prescribed under Notification No. 75/2003-Cus. (NT) dated 12.09.2003.
Findings Of The Tribunal
The Tribunal held that since the goods were released at the appellant’s own request under the provisional release mechanism of the Customs Act, the amounts paid were clearly in the nature of differential customs duty and not pre-deposits. “All those goods were ordered to be released as per the provisions of the Customs Act, 1962, at the assessee’s own request for provisional release of the goods. This apparent and admitted fact is sufficient to hold that the amounts in question cannot be considered as an amount deposited under protest,” observed Dr. Rachna Gupta.
Accordingly, Section 35FF of the Central Excise Act was held to be inapplicable. The Bench affirmed that Section 27A of the Customs Act governed interest on delayed refunds, and that interest was payable only after three months from the date of filing the refund application until the actual date of disbursement. The Tribunal further noted that the Delhi High Court had already limited the rate of interest to 6% in similar cases, and as per Notification No. 67/2003, the statutory rate prescribed by the Central Government was 6%.
Verdict
Holding that the Commissioner (Appeals) had correctly applied the law, the Tribunal dismissed the appeal, observing that the interest at 6% granted by the authorities was proper and in accordance with Section 27A.“No question arises for sanctioning interest from the date of payment of the amount in question, for the amount in question being the amount of customs duty instead of an amount of pre-deposit,” the Bench concluded.
The CESTAT thus affirmed that payments made for provisional release of seized goods are not pre-deposits, and any refund thereof attracts interest only at 6% under Section 27A of the Customs Act, starting three months after the refund application.
Appearance
Counsel for Appellant/ Assessee: Shri Anup Kumar Srivastava
Counsel for Respondent/ Department: Shri V.J. Saharan
Cause Title: M/s Vortex Rubber Industries Pvt. Ltd. v. Principal Commissioner of Customs (Preventive), New Delhi
Case No: Customs Appeal No. 50494 of 2024
Coram: Dr. Rachna Gupta (Judicial Member)
