Case Note & Summary
The petitioner, M/s Pride Foramer, a company engaged in offshore oil exploration, imported a rig 'Pride Pensylvania' for a contract with ONGC. On 15 May 2000, it filed a bill of entry and cleared the rig on payment of duty on a value of $18 million. On 26 September 2001, the respondent, Commissioner of Customs (Import), seized the rig and directed the petitioner to deposit Rs.10 crores in cash and furnish a bond of Rs.50 crores pending investigation. The petitioner challenged this by filing Writ Petition No.2023 of 2001, but the Court only extended time to comply. On 31 October 2001, the petitioner deposited Rs.10 crores and gave the bond. On 8 January 2002, a show cause notice was issued, and on 25 June 2002, the Commissioner passed an order confiscating the rig and demanding differential duty of Rs.29,45,19,056 with interest at 24% and imposed a penalty of the same amount. Both parties appealed to CESTAT, which by a common order dated 30 June 2003 set aside the Commissioner's order and dismissed the revenue's appeal. The petitioner then filed the present writ petition seeking return of the security deposit of Rs.10 crores with interest at 18% per annum from the date of deposit. The respondent opposed, arguing that the deposit was made under Section 129E of the Customs Act as a condition for release and that the petitioner should apply for refund under Section 27. The Court held that once the proceedings are finalized in favour of the importer, the revenue cannot retain the deposit. The Court rejected the argument that the deposit was under Section 129E, noting that the rig was released before any adjudication and the deposit was made pending investigation. The Court directed the respondent to return the Rs.10 crores with interest at 18% per annum from the date of deposit (31 October 2001) till payment, within four weeks.
Headnote
A) Customs Law - Security Deposit - Refund - Sections 110, 124, 125, 129E, 143A, 27 of the Customs Act, 1962 - The petitioner deposited Rs.10 crores as security for release of seized rig pending investigation. After CESTAT set aside the confiscation order, the respondent retained the deposit. The Court held that once the proceedings are finalized in favour of the importer, the revenue cannot retain the security deposit and must return it with interest. The Court directed refund of Rs.10 crores with interest at 18% per annum from the date of deposit till payment. (Paras 1-10) B) Customs Law - Interest on Refund - Section 27 of the Customs Act, 1962 - The Court held that the petitioner is entitled to interest on the refund of security deposit from the date of deposit, as the deposit was made under compulsion and the revenue had the use of the money. The rate of interest was fixed at 18% per annum considering the commercial nature of the transaction and the period of retention. (Paras 8-10)
Issue of Consideration
Whether the respondent is entitled to retain the security deposit of Rs.10 crores after the CESTAT set aside the confiscation order and whether the petitioner is entitled to interest on the deposit from the date of deposit till payment.
Final Decision
The Court allowed the writ petition and directed the respondent to return the security deposit of Rs.10 crores with interest at 18% per annum from the date of deposit (31 October 2001) till payment, within four weeks.
Law Points
- Security deposit refund
- Interest on refund
- Customs Act
- 1962
- Section 110
- Section 124
- Section 125
- Section 129E
- Section 143A
- Section 27
- Unjust enrichment
- Revenue's right to retain deposit after final order
