CESTAT Kolkata Orders 12% Interest to Berger Paints on Customs Refund

Aadrikaa Legal Services (ALS)- Law I Litigation I Arbitration

Date: 23.07.2026

CESTAT Kolkata Orders 12% Interest to Berger Paints on Customs Refund

A recent order by the Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Kolkata, has set a significant precedent in customs refund jurisprudence. The case involved M/s. Berger Paints India Limited and the Department of Customs, focusing on the rate of interest applicable to refunds of amounts deposited during investigations.

Background of the Case

Berger Paints India Limited imported mixed xylene isomers between 2011 and 2014, classifying them under Customs Tariff Heading 2902.44.00. The goods were warehoused and later cleared for home consumption after duty payment. Subsequently, the Directorate of Revenue Intelligence (DRI) initiated an investigation, contending that the goods should be classified under a different heading (2707), resulting in a duty difference of Rs. 7,44,493. Berger Paints deposited this amount ‘under protest’ in 2014.

In 2017, the adjudicating authority confirmed the demand and appropriated the deposit as duty. Berger Paints appealed to CESTAT, which ruled in their favor in January 2025, setting aside the demand. The Department’s appeal to the Supreme Court was dismissed in September 2025.

The Refund Dispute

Following the Supreme Court’s dismissal, Berger Paints sought a refund of the deposited amount, along with interest at 12% per annum. The authorities refunded the principal with 6% interest, prompting Berger Paints to appeal for the higher rate.

Legal Arguments

• Appellant’s Position: Berger Paints cited several precedents, including the Supreme Court’s decision in ITC Ltd. and the Calcutta High Court’s rulings in Madura Coats Private Limited and Rajendra Kumar Jain, which directed payment of 12% interest on delayed refunds of investigation deposits.
• Department’s Position: The Department argued that 6% interest was appropriate, referencing various High Court decisions and a 2014 government notification fixing the rate at 6% for certain refunds.

Tribunal’s Analysis and Decision

The Tribunal examined the legal landscape and emphasized the binding nature of the jurisdictional High Court’s decisions. It noted:

1. The Calcutta High Court, in Rajendra Kumar Jain (2024), held that in the absence of a statutory provision fixing the interest rate for investigation deposit refunds, 12% interest is payable.
2. The 6% rate notification applies only from its date of effect and does not cover periods prior to its issuance.
3. The Tribunal is bound to follow the jurisdictional High Court’s interpretation when there is a conflict among High Courts.

Accordingly, the Tribunal set aside the order granting only 6% interest and directed that Berger Paints be paid interest at 12% per annum on the refunded amount.

Key Takeaways for Importers and Legal Practitioners

1. Jurisdictional High Court Rulings Prevail: When conflicting High Court decisions exist, the Tribunal must follow the ruling of the High Court with jurisdiction over the case.
2. Interest on Investigation Deposits: In the absence of a statutory provision, higher interest (12%) may be awarded on refunds of amounts deposited during investigations, as per prevailing High Court judgments.
3. Notification Applicability: Government notifications fixing interest rates apply prospectively and do not affect periods before their issuance.

Conclusion

The CESTAT Kolkata’s order in favor of Berger Paints India Limited reinforces the importance of jurisdictional High Court decisions in customs matters and clarifies the applicable interest rate on refunds of investigation deposits. This ruling provides valuable guidance for importers and legal professionals dealing with similar disputes.

Source: CESTAT Kolkata

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