CESTAT Delhi Orders Interest Payable On ₹113.69 Crore Deposited By Nikon India During Supreme Court Appeal

The Customs, Excise, and Service Tax Appellate Tribunal (CESTAT), Delhi, has ruled in favour of Nikon India in a customs dispute over import of digital cameras, holding that the Customs department must pay interest on Rs. 113.69 crore deposited under directions of the Supreme Court.

A Bench of President Justice Dilip Gupta and Technical Member Hemambika R. Priya held that once the Supreme Court directed refund of the amount with interest, the department was bound to follow that direction and could not deny interest by applying provisions of the Customs Act.

“the said amount will be refunded to the appellant/applicant forthwith with applicable interest in the event of the appeal being allowed.”, the top court had directed.

The tribunal said that the refund and interest had to be governed by the Supreme Court's order. It rejected the department's stand that interest was not payable since the refund was issued within three months under statutory provisions.

On facts, Nikon India imported various models of digital still image video cameras between March 2012 and February 2014 and claimed exemption under a customs notification.

The Directorate of Revenue Intelligence alleged that the company had incorrectly claimed exemption, and a show cause notice was issued proposing recovery of duty. The demand was later confirmed and upheld by the Tribunal, after which the company filed an appeal before the Supreme Court.

During the pendency of the appeal, Nikon sought permission from the Supreme Court to deposit the disputed amount to stop accrual of interest. It stated that the deposit would be made under protest and treated as recoverable in its books, and not as payment of duty

The Supreme Court, by order dated January 3, 2019, permitted the deposit of Rs. 113.69 crore with a condition that the amount would be refunded with interest if the appeal succeeded. Nikon deposited the amount on January 15, 2019.

The Supreme Court later allowed the appeal on March 9, 2021 and set aside the entire demand. Nikon sought a refund along with interest. While the Customs department refunded the principal amount, it denied interest on the deposit made under the Supreme Court's order, though interest on a pre-deposit was granted.

The tribunal held that the amount deposited under the Supreme Court's order cannot be treated as duty. It also clarified that the phrase “applicable interest” means interest must be paid at the appropriate rate.

Accordingly, the Tribunal set aside the denial of interest and directed the Customs department to pay interest at 6% per annum from the date of deposit till the date of refund.

For Appellant: Advocates V. Lakshmikumaran, Dhruv Matta and Shobhit Jain

For Department: PRV Ramanan, Special Counsel, and Rakesh Kumar, Authorised Representative