2011 (3) TMI 891 - AT - Customs

Imported goods - Royalty payable - The assesses contention is that the refund amounts represents SVB deposit and not duty, that as per the Circular No.1/98-Cus., dated 01.01.1998, amount of extra deposit presently kept at 5% of the value of the goods and henceforth be reduced to 1% of the value, which clearly shows that the amount paid, which has been claimed by way of refund is only a deposit and that after setting aside of the loading, the provisional assessment of the goods has not been finalised and on finalisation if the amount paid is in excess of the duty finally assessed, the assessees were automatically entitled to a refund, have not been considered by the authorities below - Interests of justice therefore require that the impugned order be set aside and the goods be remitted to the adjudicating authority for fresh decision in the light of the pleas raised by the assessees.

Summary

Issues:
1. Loading of Customs duty on imported goods due to relationship between overseas supplier and importer.
2. Rejection of claim for refund as time-barred.
3. Nature of the payment made by the assesses - duty or deposit.

Analysis:

Issue 1: Loading of Customs duty on imported goods
The case involved the import of "CKD components" where Customs duty was assessed by adding 5% to the value of the goods due to the relationship between the overseas supplier and the importer. The Commissioner (Appeals) set aside the loading, stating that the payment made by way of royalty was explicitly for post-import activities and not related to the imported goods' price. The Tribunal emphasized that the payment was not linked to the goods' value and ordered a fresh decision by the adjudicating authority, considering the pleas raised by the assesses. The Tribunal referred to previous decisions supporting the return of the value deposited during SVB investigation without limitation issues.

Issue 2: Rejection of claim for refund
After the loading of duty was set aside, the assesses filed a claim for refund, which was rejected as time-barred. The Commissioner (Appeals) upheld this rejection, stating that the payment was considered duty under Section 27 of the Customs Act, 1962. The Tribunal, however, noted that the amount paid was a deposit, not duty, and highlighted the Circular reducing the deposit amount from 5% to 1% of the goods' value. The Tribunal ordered a fresh decision by the adjudicating authority, emphasizing that if the amount paid exceeded the final assessed duty, the assesses were entitled to a refund.

Issue 3: Nature of payment - duty or deposit
The assesses contended that the refund amount represented a Special Valuation Branch (SVB) deposit, not duty. They argued that the payment, claimed as a refund, was only a deposit, especially since the provisional assessment of the goods had not been finalized. The Tribunal agreed with the assesses, stating that the refund claim was based on a deposit and not duty. The Tribunal allowed the appeal by remanding the case for a fresh decision by the adjudicating authority, emphasizing the need for a fair hearing for the assesses.

In conclusion, the Tribunal's judgment focused on the loading of Customs duty, rejection of the refund claim, and the nature of the payment made by the assesses. The decision highlighted the distinction between duty and deposit, emphasizing the assesses' entitlement to a refund if the amount paid exceeded the final assessed duty. The case was remanded for a fresh decision, considering the assesses' arguments and previous decisions supporting the return of deposited amounts during SVB investigations.