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Commissioner of Customs (Import), Raigad v. M/s. Finacord Chemicals (P) Ltd. & Ors.

Civil Appeal · Neutral citation not assigned (Civil Appeal Nos. 1633-1638 of 2004)Decided 8 Apr 2015
Civil Appeal Nos. 1633-1638 of 2004
Justice A.K. Sikri · Justice Rohinton Fali Nariman

Background

Customs authorities alleged that two importers had under-invoiced imported consignments of undenatured ethyl alcohol, leading to a demand for differential duty, confiscation of goods, and penalties. On appeal, the CESTAT accepted the importers' invoiced price, reduced the redemption fine and penalties, while still holding the import itself unauthorised. The Revenue (Commissioner of Customs) appealed this reduction to the Supreme Court, and a connected appeal (C.A. No. 6541 of 2010) was brought by a successor buyer of the goods, seeking refund with interest of money it had deposited years earlier under a Bombay High Court interim order, which the Department resisted on the ground of "unjust enrichment."

Decision Breakdown

The Supreme Court held that the CESTAT had given valid, reasoned findings for accepting the invoice price and for reducing the fine/penalty, and that this exercise of discretion did not warrant interference; it accordingly dismissed the Revenue's main appeal (C.A. Nos. 1633-1638/2004), while clarifying that this would not affect a separate pending appeal in the Bombay High Court. On the connected buyer's appeal (C.A. No. 6541/2010), the Court held that since the amount had been deposited pursuant to an interim High Court order and was never actually paid as "duty," the doctrine of unjust enrichment did not apply to bar the refund; it allowed that appeal, set aside the part of the High Court order denying refund, and directed repayment with 13% annual interest as originally ordered in 1991. The connected Revenue appeal (C.A. No. 3410/2006) was dismissed as a consequence of these findings.

Lesson Learnt

Money deposited with customs/court authorities under an interim court order (as a condition for release of goods), rather than paid as an actual duty liability, is treated differently from a duty payment: the "unjust enrichment" bar that normally applies to block duty refunds does not automatically apply to such deposits.

Official source (sci.gov.in)View Judgment (PDF)

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