MIS. O.N.G.C. LTD. v. COMMNR. OF CUSTOMS, MUMBAI

Case Details & Bench

Court: High Court
Hon'ble Judges: S.B. Sinha
Markandey Katju
Judgment Date: 2007-08-01
Court Decision / Holding: The respondent is directed to pay a sum of Rs. 9,51,21,999.50 by way of interest within six weeks from the date of the order. The application is disposed of accordingly. No costs.
Final Disposition: Application disposed; government to pay interest; no costs.

Parties to the Case

Appellants / Petitioners

M/s ONGC Ltd.

Respondents

Commissioner of Customs, Mumbai

Legal Representation & Advocates

Counsels for Petitioners

• A S Ganesh
• Shiv Prakash Pandey
• Rekha Pandey
• Raj Kumar Tanwar

Counsels for Respondents

• Rajiv Dutta
• M.F. Humayunisa
• Subha Rao
• B. Krishna Prasad

Case Synopsis & Summary

ONGC Ltd, a public sector undertaking, engaged Mis. CSEDCO Forex Intl. Drilling Inc. to obtain information for oil and gas exploration. The resulting data, recorded on 3-D seismic tapes, attracted customs duty. Although an exemption notification claimed exemption, assessment proceedings were initiated and completed, leading to a challenge in this Court; by 24.08.2006 the Court had set aside the assessments. While the Civil Appeals were pending, a substantial sum of Rs. 54,72,87,536 was realized by way of customs duty and accrued interest (divided across dates). ONGC filed an application seeking interest on this amount from the date of recovery, urging the restitution principle and equity. Counsel for the appellant urged that, given the pendency and the huge deposits, interest at 12% per annum should be awarded and paid by restitution. The respondent contended there was no direct investment of the money by the Government, which used the funds for welfare, so no interest should be payable. The Court agreed, in principle and in equity, that the appellant is entitled to interest on the deposited amount on restitution grounds, but given that the amount had already been refunded, directed that the amount deposited shall carry interest at 6% per annum, citing Pure Helium India (P) Ltd v. ONGC, McDermott Int'l Inc. v. Burn Standard Co. Ltd, and South Eastern Coalfields Ltd v. State of MP. The order directs payment of Rs. 9,51,21,999.50 within six weeks, with no costs, and disposes of the application.

Legal Doctrines & Maxims

Principle of restitution
Equity

Submissions & Arguments

Contentions of Appellants / Petitioners

The appellant contended that during pendency of the appeals it deposited a large sum as customs duty. Despite exemption claims, assessments proceeded; after this Court’s earlier order setting aside assessments, restitution principles and equity justify payment of interest on the deposited amount. They urged, with reference to Pure Helium India (P) Ltd v. Oil & Natural Gas Commission and McDermott International Inc. v. Burn Standard Co. Ltd, that interest should be payable, initially at a higher rate (12% per annum). However, because the government did not invest the money but used it for welfare, they sought restitution-based compensation in equity.

Contentions of Respondents

The respondent argued the Central Government did not invest the recovered amount; the funds were utilized for public welfare and not for investment, so no interest should be payable. The government urged that there is no basis for awarding interest since there was no loss to the public exchequer attributable to the government’s use of the funds during pendency.

Cited Precedents (3)

Case Name	Citation	Treatment	Explanation
Pure Helium India (P) Ltd v. Oil & Natural Gas Commission	(2003) 8 SCC 593	Positive	Cited to support restitution-based interest on deposited amounts during pendency.
Mcdermott International Inc. v. Burn Standard Co. Ltd & Ors.	(2006) 6 SCALE 220	Positive	Cited as authority for principles of restitution and interest on deposited sums.
South Eastern Coalfields Ltd v. State of MP. and Ors.	(2003) 8 SCC 648	Positive	Referenced for principle of restitution in the context of government receipts and refunds.

Extracted Judgment Text

Exact text extracted from official judgment records.

# _MIS._ O.N.G.C. LTD. _v._ COMMNR. OF CUSTOMS, MUMBAI ## AUGUST l, 2007 [S.B. SINHA AND MARKANDEY KA TJU, JJ.] _Interest-Claimed on the amount realised as customs duty which was ultimately refunded to assessee-:-Held: In principle as also in equity, assessee is entitled to interest on the amount deposited on application of principle_ C _of restitution-Having regard to the fact that the amount paid by assessee has already been refunded, the amount deposited fly assessee shall carry interest_ @ _6% per annum-Principle of restitution-Customs duty-Interest on-Equity._ _Pure Helium India (P) Ltd_ v. _Oil_ & _Natural Gas Commission,_ (2003) 8 D SCC 593 and _Mcdermott International Inc._ v. _Burn Standard Co. Ltd_ & _Ors.,_ (2006) 6 SCALE 220, relied on. _South Eastern Coalfields Ltd_ v. _State of MP. and Ors.,_ (2003) 8 SCC 648, referred to. E ## CIVIL APPELLATE JURISIDICTION I.A. No. 4 IN Civil Appeal No. 1882 of2004. F From the final Order Nos. C-IV32-19/WZV/2003 dated 09.12.2003 in Appeal No. 51/2002 passed by the customs, Excise and Service Tax Appell ate Tribunal, West Zonal Bench at Mumbai ## WITH G -· I.A. No. 4 in Civil Appeal No. 854 of 2005. 743 H _I_ 744 [2007) 8 S.C.R. ## SUPREME COURT REPORTS A S. Ganesh, Shiv Praksah Pandey, Rekha P~ndey and Raj Kumar Tanwar, for the Appeallant. Raj iv Dutta, M.F. Humayunisa, Subha Rao and B. Krishna Prasad for the Respondent. B The Order of the Court was delivered by ## ORDER S.B. SINHA, J. Appellant is a public _sector undertaking wholly owned and controlled by the Central Government. It obtained the services of _Mis._ C SEDCO Forex Int. Drilling Inc. for obtaining requisite information which would assist it in the matter of exploration· of oil and gas. The information so gathered was recorded in 3-D Seismic Tapes. On the amount paid therefor, custom duty was sought to be levied .. An exemption was claimed by the appellant from payment of custom duty in terms of an exemption notification issued by the Central Government in that behalf. As despite such claim, D assessment proceedings were initiated and completed, the matter came upto this Court and by a judgment and order dated 24.08.2006,,c011tention of the appellant was accepted by this Court and the orders of assessment were set aside. E During pendancy of the Civil Appeals before this Court, a sum of Rs. 54, 72,87,536.00 was realised by way of custom duties and interest thereon, etc. as per the following details: "(i) 14.09.2004 Rs. 25,00,00,000.00 adjusted towards duty F - (ii) 30.03.2004 Rs. 17,72,87,536.00 appropriated towards interest (iii) . 24,02.2005 Rs. 12,00,00,000.00 adjusted towards interest ## Total Rs. 54,72,87,536.00" G An application has now been filed for a direction to the respondent to pay interest on the said sum with effect from the date of recovery till the date of the appellant. Mr. S. Ganesh, learned senior counsel appearing on behalf of the H Appellant, would submit that keeping in vid 1[w the fact that the appellant had ] I - ## O.N.G.C. LTD. v. COMMNR. OF CUSTOMS, MUMBAI [S.B. SINHA, J.] 745 to deposit a huge amount during pendency of the Civil Appeals, interest of A justice would be met if this Court directs the respondent to pay interest at the rate of 12% per annum on the said amount. It was submitted that interest should be directed to be paid by way of restitution, as has been held by this Co~rt in _South Eastern Coalfields ltd_ v. _State of MP. and Ors.,_ [2003] 8 SCC 648. B Mr. Rajiv Dutta, learned senior counsel appearing on behalf of the respondent, on the other hand, would submit that the Central Government did not make any investment of the amount received by it by way of ir<lirect tax but expended the same for the welfare of the people and, thus, no interest should be directed to be paid in the instant case. C Appellant is a public sector undertaking. Respondent is the Central Government. We agree that in principle as also in equity the appellant is I entitled to interest on the amount deposited on application of principle of restitution. In the facts and circumstances of this case and particularly having regard to the fact that the amount paid by the appellant has already been D refunded, we direct that the amount deposited by the appellant shall carry interest at the rate of 6% per annum. Reference in this connection may be made to _Pure Helium India (P) ltd_ v. _Oil & Natural Gas Commission,_ [2003] 8. SCC 593 and _Mcdermott International Inc._ v. _Burn Standard Co. Ltd & Ors.,_ (2006) 6 SCALE 220. E Respondent, therefore, is directed to pay a sum of Rs. 9,5 l,21;999.50/by way of interest. Such amount should be paid within a period of six weeks from date. The application is disposed of accordingly. No costs. RP. Interlocutary application disposed of.