CESTAT Kolkata Directs 12% Interest on Refund of Amount Deposited During Customs Investigation
Background and Facts of the Case
Berger Paints India Limited found itself in a prolonged customs dispute that ultimately reached CESTAT Kolkata on a narrow but significant question — whether the applicable rate of interest on a refund of an amount deposited during investigation should be 6% or 12%.
The company had imported mixed xylene isomers over a period spanning 2011 to 2014, classifying the goods under Customs Tariff Heading 2902.44.00 of the Customs Tariff Act, 1975. The imports were made through a high seas purchase arrangement. Bills of entry for warehousing were duly filed and assessed, the goods were warehoused, and upon payment of applicable duty through ex-bond bills of entry, the goods were cleared for home consumption. Importantly, the original assessment orders were never challenged by the assessee.
The matter took a different turn when the Directorate of Revenue Intelligence (DRI), Delhi initiated a classification investigation into these xylene isomers. The Revenue took the position that the goods were correctly classifiable under Customs Tariff Heading 2707, which would attract a higher rate of duty. The differential duty worked out to ₹7,44,493/-, and the assessee was directed to deposit this amount pending the ongoing investigation. The assessee complied and deposited the said sum under protest in 2014.
Chronology of Proceedings
The journey of this dispute passed through multiple forums before reaching the interest rate controversy:
- 25.10.2017 — The adjudicating authority confirmed the differential duty demand and directed appropriation of the deposited amount toward the confirmed duty liability.
- 30.01.2025 — CESTAT, on the assessee's appeal, set aside the demand confirmation order and allowed the appeal in its entirety.
- 17.09.2025 — The Department preferred an appeal before the Supreme Court, which was dismissed, conferring finality on the CESTAT order in favour of the assessee.
- Post-finality — The assessee claimed refund of the amount deposited during investigation. The refund was sanctioned; however, interest was granted at 6% instead of the claimed 12%, prompting the present appeal before CESTAT Kolkata.
Note: Of the total deposited amount, 7.5% of the confirmed duty was treated as pre-deposit, and the balance was treated as an amount deposited during the course of investigation. The assessee's grievance in the present appeal was confined solely to the rate of interest applicable to the refund of the latter portion.
The Sole Issue Before CESTAT
The Tribunal crystallised the legal question as follows:
Whether the grant of interest at 6% on the delayed refund of the amount deposited during the course of investigation is legally sustainable, or whether interest at 12% is payable in such cases?
Arguments Advanced by the Assessee
The assessee placed reliance on a line of judicial precedents to substantiate its claim for interest at 12%:
- ITC Ltd., 179 ELT 15 (Supreme Court) — The apex court's ruling was cited as foundational authority for entitlement to 12% interest on delayed refunds of amounts deposited during investigation.
- Madura Coats Private Limited v. Commissioner of Central Excise, 285 ELT 188 (Calcutta High Court) — The Calcutta High Court, while directing refund of amounts deposited during investigation, had explicitly held that interest at 12% per annum was payable for delayed refunds.
- Rajendra Kumar Jain v. Commissioner of Customs (Port), Kolkata & Others (Calcutta High Court), Order dated 09.05.2024 — This was presented as the most direct and binding authority. The Calcutta High Court had categorically held in this case that where no statutory provision prescribes the applicable rate of interest for refund of amounts deposited during investigation, interest at 12% is the applicable rate.
Department's Defence
The Revenue opposed any enhancement of the interest rate, contending that: