CESTAT Allows Refund of Extra Duty Deposit Paid Through Promoter Loan

The Allahabad Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has held that refund of Extra Duty Deposit (EDD) cannot be denied on the ground of unjust enrichment merely because the importer had borrowed funds from its promoter company for payment of customs duty. The bench of Sanjiv Srivastava (Technical Member), observed that a loan transaction between a promoter company and its subsidiary is entirely separate from the transaction relating to import and clearance of goods. It held that the customs authorities had wrongly concluded that the burden of duty had been passed on merely because the promoter company initially financed the EDD payment. The dispute arose after the appellant imported goods under two Bills of Entry where the customs department provisionally assessed the consignments due to Special Valuation Branch (SVB) proceedings involving related-party imports. During provisional assessment, EDD at 5% of assessable value was collected by customs authorities. Later, the assessments were finalized without any enhancement in declared value, entitling the importer to seek refund of the deposited EDD. The company filed a refund claim of Rs. 5.08 lakh covering two Bills of Entry. While part refund of Rs. 3.26 lakh was sanctioned, the refund of Rs. 1.81 lakh relating to a Bill of Entry dated 12 January 2022 became the subject matter of litigation. Customs authorities acknowledged that excess duty had been paid and that the amount was refundable, but directed that the sum be transferred to the Consumer Welfare Fund on the ground that the incidence of duty had allegedly been passed on to another entity, namely the promoter company M/s Global Autotech Ltd. The department relied upon journal vouchers showing that the promoter company had initially provided funds for payment of the customs duty deposit. Based on these accounting entries, the adjudicating authority invoked the principle of unjust enrichment and concluded that the importer had not borne the incidence of duty itself. The appellant argued that the promoter company had merely extended a temporary loan because of shortage of funds and that the same was subsequently repaid through banking channels. The importer also produced a Chartered Accountant certificate certifying that the refund amount had not been passed on to any other person and had been reflected in the balance sheet as recoverable from customs authorities. The Tribunal accepted these submissions and found that the Commissioner (Appeals) had committed a factual error by relying upon the balance sheet of Financial Year 2020-21 while examining an EDD deposit made in Financial Year 2021-22. The Bench noted that the amount of Rs. 1.81 lakh had in fact been reflected as “recoverable from customs authority” in the balance sheet for FY 2021-22 and continued to appear similarly in subsequent financial statements. The Tribunal observed that the recipient of imported goods after customs clearance remained the importer itself, which had used the goods in manufacture. It emphasized that unjust enrichment would arise only if the burden of duty had been passed on within the same commercial transaction, such as by sale of imported goods to a buyer. A financing arrangement through a loan from the promoter company could not be equated with passing on the incidence of duty. The CESTAT further held that the appellant was entitled to interest on delayed refund under the Customs Act and relied upon the Supreme Court judgment in Ranbaxy Laboratories Ltd. The Tribunal also referred extensively to Delhi High Court and Karnataka High Court rulings explaining the legal nature of EDD. It reiterated that EDD is merely a security deposit collected during provisional assessment and not customs duty in itself. Therefore, once the SVB proceedings conclude without enhancement of value, the department is obligated to refund the amount. Setting aside the impugned order, the Tribunal finally allowed the appeal and directed grant of refund to the appellant. Case Details Case Title: M/s Global YDK Electric P. Ltd. Versus Commissioner of Customs, Central Goods & Service Tax, Noida Citation: JURISHOUR-1245-CES-2026(ALL) Case No.: Customs Appeal No.70121 of 2026 Date: 13/05/2026 Counsel For Appellant: Atul Gupta, Advocate Counsel For Respondent: Santosh Kumar, Authorised Representative Click Here To Read Order Read More: Inconclusive Lab Reports Can’t Decide Customs Classification: CESTAT Orders Retesting of Imported “Thinner” Goods

CESTAT Allows Refund of Extra Duty Deposit Paid Through Promoter Loan

Membership Required

Latest articles

Centre Enforces Jan Vishwas Amendments to Tea Act from June 24; Minor Compliance Violations Decriminalised

Centre Extends Tenure of SAT Technical Member Meera Swarup Till September 8, 2026

Madras High Court Rules GST Show Cause Notices Must Disclose Grounds for Invoking Extended Limitation

Center Approves University of Hyderabad for Scientific Research; Grants 5-Year Income Tax Exemptions on Donations

More like this

Centre Enforces Jan Vishwas Amendments to Tea Act from June 24; Minor Compliance Violations Decriminalised

Centre Extends Tenure of SAT Technical Member Meera Swarup Till September 8, 2026

Madras High Court Rules GST Show Cause Notices Must Disclose Grounds for Invoking Extended Limitation

About us

Company

Categories