2008 (2) TMI 673 - AT - Customs

Summary

Issues:
1. Refund of bank guarantee amount due to delay in obtaining Export Obligation Discharge Certificate (EODC).
2. Interpretation of whether bank guarantee amount is considered duty payment under Section 27 of the Customs Act.
3. Applicability of time limitation under Section 27 for refund claims.
4. Communication requirement before encashment of bank guarantee.

Analysis:

1. The appellants imported automobile components under an advance license and cleared goods availing exemption after furnishing a bank guarantee of Rs. 1,50,000. They later sought EODC from DGFT, but due to delay, the department encashed the bank guarantee in 2005. The Assistant Commissioner sanctioned the refund, which was challenged by the department.

2. The Commissioner (Appeals) rejected the refund claim, considering the bank guarantee as duty payment under Section 27 of the Customs Act. He held that the appellant forfeited the right to refund by failing to fulfill obligations. Citing precedents, he emphasized that once duty is paid as per assessment and not challenged, a refund contrary to assessment cannot be granted.

3. The Tribunal found that the bank guarantee was not a duty payment but a security against non-compliance with exemption conditions. It noted that the delay in obtaining EODC was due to DGFT's actions, not the importer's fault. The Tribunal disagreed with the Commissioner's reliance on prior judgments and held that the bank guarantee refund was not governed by Section 27.

4. The Tribunal referenced decisions by the Madras High Court and previous Tribunal rulings to support the appellant's claim. It highlighted that the bank guarantee encashment was not subject to the time limitation under Section 27. The Tribunal allowed the appeal, emphasizing that the bank guarantee amount was not considered duty and the delay in EODC submission was not the importer's fault.

In conclusion, the Tribunal allowed the appeal by M/s. Pentagon Machines & Services (P) Ltd., stating that the bank guarantee amount refund was not governed by Section 27 of the Customs Act. The decision was based on the understanding that the bank guarantee was a security, not a duty payment, and the delay in EODC submission was not the importer's fault.