Acts & Sections Discussed:

1. Article 226 of the Constitution of India – Writ petition for enforcement of rights.
2. Section 35FF of the Central Excise Act, 1944 – Interest on pre-deposits.
3. Section 129EE of the Customs Act, 1962 – Interest on refund.

The court addressed whether the petitioner, whose cash was seized during a GST investigation, was entitled to receive interest at a higher rate than 6%, which was the interest rate offered by the respondents. The court ruled that the respondents, having invested the seized cash in fixed deposits earning more than 6%, could not limit the refund to 6% interest. This constituted unjust enrichment.

Ratio:
The court held that when cash is seized and kept in fixed deposits by the authorities, they are duty-bound to return the entire interest earned from the fixed deposits to the petitioner. Limiting the refund to 6% interest would amount to unjust enrichment by the respondents.

1. Introduction:

• Petitioner: Ramkaran Karwa, 85 years old, resident of Mumbai.
• Respondents: Union of India and others related to Central Goods and Services Tax (CGST).

2. Writ Petition Context:

• Petitioner filed under Article 226 of the Constitution seeking to quash an order dated 5th July 2024. The issue revolved around the interest rate granted on seized cash that was eventually refunded, where only 6% interest was granted instead of 18%.

3. Facts Leading to the Case:

• In August 2011, cash amounting to Rs.2,22,27,000/- was seized from the petitioner and his son during an investigation by the GST department.
• After multiple legal proceedings, the confiscation of the cash was set aside by the appellate authorities, and no tax dues were held against the petitioner.

4. Non-Refund of Seized Cash:

• Despite appellate orders in favor of the petitioner, the cash was not refunded until July 2024, after a long legal struggle. The refund was issued with interest at 6%, though the respondents had deposited the cash in fixed deposits earning more than 6% interest.

5. Respondents' Defense:

• The respondents relied on a Circular dated 16th September 2014, which allowed only 6% interest for refunds, arguing that this applied to the seized cash as well.

6. Petitioner's Arguments:

• The petitioner contended that the circular applied to pre-deposits made under section 35FF of the Central Excise Act or section 129EE of the Customs Act, not to cash seized during an investigation.
• Additionally, the petitioner argued that since the seized cash was invested in fixed deposits, the entire interest earned (more than 6%) should be refunded.

7. Court’s Analysis:

• The court observed that the seized cash was not a pre-deposit made by the petitioner but money held in trust by the respondents.
• The circular relied upon by the respondents was deemed inapplicable to this case. The respondents’ action of retaining the difference between the actual interest earned (more than 6%) and the 6% granted to the petitioner was ruled as unjust enrichment.

8. Trustee's Obligation:

• The court highlighted that the respondents, acting as trustees of the seized money, were required to refund the actual interest earned on the fixed deposits. Keeping part of the interest was considered as "misappropriation."

Order:

1. The impugned order dated 5th July 2024 is quashed.
2. The petitioner is entitled to a sum of Rs. 90,07,829/- (the difference between 6% interest and the actual interest earned on fixed deposits).
3. The respondents are directed to refund the said sum within four weeks, failing which interest at 6% per annum will apply.
4. The Commissioner of GST & CX is directed to initiate an inquiry to identify and penalize those responsible for the non-renewal of fixed deposits after 10 years.
5. Writ Petition (Stamp) No. 26523 of 2024, filed by the petitioner’s son, was similarly disposed of, with a direction to refund Rs. 6,95,899/-.

Subjects:

• GST Refund
• Seized Cash
• Fixed Deposits
• Unjust Enrichment
• Interest Refund