2006 (7) TMI 363 - AT - Customs

Rejection of appellant s application for refund of excess Customs Duty paid - erroneous computation of assessable value in the Bill of Entry - refund claim of the appellant was rejected by the lower authority on the ground that the assessment on the relevant Bill of Entry had not been appealed against - violation of principle of unjust enrichment - HELD THAT - The Customs Manual of Instructions has been issued on 11th September, 2001 by the Central Board of Excise Customs (in short the Board ). In Chapter 15 of the said Manual it has been clarified that in cases where excess payment of duty has been made due to incorrect assessment by the Customs authorities, the importer must file a claim under Section 27 of the Customs Act for refund of the excess amounts. When it is clear and apparent that duty incidence had not been passed on by the appellant, then they were entitled to refund in accordance with Section 27(2) of the Act. The refund can not be denied on the presumptuous ground that the appellant would pass on the same later on . Section 27 of the Act does not provide for denial of refund on any such hypothetical conclusions. The impugned order of the Commissioner (Appeals) is to be set aside and the respondent Customs authorities directed to refund the excess duty of Rs. 94,99,376/- at the earliest - Appeal allowed.

Issues Involved:
1. Admissibility of refund claim due to erroneous computation of assessable value.
2. Requirement of appealing against the assessment order for refund claims.
3. Application of the principle of unjust enrichment.

Issue-Wise Detailed Analysis:

1. Admissibility of Refund Claim Due to Erroneous Computation of Assessable Value:
The appellant, engaged in the manufacture of steel, imported goods in March 2002 and paid excess customs duty due to a clerical error in currency conversion from Swedish Kroner to Swiss Franc. This error resulted in an inflated assessable value and excess duty payment of Rs. 94,99,376. The appellant filed a refund claim with the Deputy Commissioner of Customs, supported by relevant documents. Despite providing evidence and explanations, including the non-passing of the duty incidence to buyers and non-inclusion in the Profit and Loss Account, the Assistant Commissioner rejected the refund claim, stating that the assessment order on the Bill of Entry was not appealed against.

2. Requirement of Appealing Against the Assessment Order for Refund Claims:
The Commissioner (Appeals) upheld the Assistant Commissioner's decision, citing the finality of the assessment order on the Bill of Entry and the necessity to appeal against it for any refund claims. The Commissioner (Appeals) referred to several case laws, including the Supreme Court's decision in Mafatlal Industries Ltd., which emphasized that refund claims are not admissible unless the assessment order is set aside. The Commissioner (Appeals) also noted that clerical errors could be corrected under Section 154 of the Customs Act, but any refund resulting from such corrections must comply with Section 27, including the principles of limitation and unjust enrichment.

3. Application of the Principle of Unjust Enrichment:
The Commissioner (Appeals) further held that even if the refund was admissible, it would be barred by the principle of unjust enrichment. The appellant failed to produce adequate documentary evidence proving that the duty incidence was not passed on to the buyers. The Commissioner (Appeals) relied on the Supreme Court's decision in Solar Pesticides Pvt. Ltd., which established that the principle of unjust enrichment applies to both direct and indirect passing of duty incidence, including cases of captive consumption of imported goods. The appellant's failure to demonstrate that the excess duty was not included in the costing of the final products led to the rejection of the refund claim on the grounds of unjust enrichment.

Separate Judgment:
The Tribunal found the Commissioner (Appeals) erred in rejecting the refund claim. It emphasized that clerical errors, as acknowledged by both the Assistant Commissioner and the Commissioner (Appeals), should be corrected under Section 154 of the Customs Act without necessitating an appeal against the assessment order. The Tribunal noted that the appellant had provided sufficient evidence to show that the duty incidence was not passed on to the buyers and that the goods were classified as 'in transit' in their computer system. The Tribunal concluded that the refund claim should not be denied based on hypothetical conclusions about future passing of duty incidence.

Conclusion:
The Tribunal allowed the appeal, set aside the impugned order of the Commissioner (Appeals), and directed the Customs authorities to refund the excess duty of Rs. 94,99,376 to the appellant at the earliest. The appeal was allowed, and the order was pronounced in court on 7-7-2006.

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