2011 (12) TMI 204 - HC - Customs

Condonation of delay in claiming refund of duty under Rule 5 and 7A of Re-export of Imported Goods (Drawback of Customs Duties) Rules, 1995 goods imported are re-exported application made for condonation of delay and refund of duty - delay of 22 days beyond the extended period - Assistant Commissioner of Customs instead of informing about its non-competency to condone the delay rather granted refund later show cause notice issued stating refund was erroneous on ground of limitation application made to Central Government for condonation of delay Central Government made an unreasoned communication of not considering the application Held that- When power has been conferred on Central Government under Rule 7A, the said power has to be exercised appropriately and fairly, after considering the grounds and reasons given by the applicant. The rejection of the application for condonation of delay of 22 days in the present case, therefore, cannot be sustained. We are satisfied that there were reasons beyond the control of the petitioner. It is a case where delay should be condoned. Since delay is of only 22 days and it is almost six years since the application for condonation of delay was made. Accordingly, we issue a writ of certiorari and quash the letter dated 3rd October, 2005 and mandamus is issued to the respondent to make refund. In case the aforesaid amount has been recovered by adjustment, the said adjustment will be treated as null and void. If any refund payment is to be made, the same will be made within a period of four weeks from the date copy of this order is received. Interest @ 12% p.a. will be payable on delay of payment of refund Decided in favor of assessee.

Issues Involved:
1. Eligibility for refund of customs duty under Section 74 of the Customs Act, 1962.
2. Timeliness of the refund claim under Rule 5 of the Re-export of Imported Goods (Drawback of Customs Duties) Rules, 1995.
3. Authority to condone delay in filing the refund claim under Rule 7A of the Rules.
4. Legitimacy of the show cause notice and demand for repayment of the refund.
5. Adequacy of the Central Government's response to the application for condonation of delay.

Issue-wise Detailed Analysis:

1. Eligibility for Refund of Customs Duty under Section 74 of the Customs Act, 1962:
The petitioner, a firm, imported photographic color films by paying customs duty and subsequently re-exported the goods within four months. They filed for a refund of the customs duty under Section 74 of the Customs Act, which allows for a refund of 98% of the duty paid on re-exported goods. The Court noted that there was no dispute regarding the identity of the goods and that the petitioner satisfied the conditions stipulated in Section 74.

2. Timeliness of the Refund Claim under Rule 5 of the Re-export of Imported Goods (Drawback of Customs Duties) Rules, 1995:
The petitioner filed the refund claim after six months and 22 days, exceeding the period specified in Rule 5, which allows a maximum of six months (three months plus an extendable period of another three months). The Assistant Commissioner of Customs initially allowed the refund but later issued a show cause notice and demanded repayment, stating that the claim was filed beyond the permissible period.

3. Authority to Condon Delay in Filing the Refund Claim under Rule 7A of the Rules:
Rule 7A empowers the Central Government to condone delays beyond the six-month period if the exporter can show reasons beyond their control. The petitioner argued that their initial application included a request for condonation of delay, which should have been forwarded to the Central Government. The Assistant Commissioner and the Commissioner of Customs (Appeals) both rejected this plea, stating that the petitioner should have directly approached the Central Government.

4. Legitimacy of the Show Cause Notice and Demand for Repayment of the Refund:
The Assistant Commissioner of Customs issued a show cause notice and confirmed the demand for repayment of Rs.18,74,035/- plus interest, citing the delay in filing the refund claim. The petitioner contested this decision, arguing that the delay was due to unavoidable circumstances, including the long illness and death of a family member. The Court found that the Assistant Commissioner should have informed the petitioner about the lack of authority to condone the delay and should have directed them to the Central Government.

5. Adequacy of the Central Government's Response to the Application for Condonation of Delay:
The Central Government's response was deemed inadequate as it merely stated that the request for condonation had not been considered, without providing any reasons. The Court emphasized that reasons are the heart and soul of an order and that the Central Government should have exercised its power under Rule 7A appropriately and fairly. The unreasoned rejection of the application for condonation of a 22-day delay was found to be unsatisfactory.

Conclusion:
The Court quashed the letter dated 3rd October 2005 and issued a writ of mandamus directing the respondent to make the payment of Rs.18,74,035/- to the petitioner. The Court was satisfied that there were reasons beyond the control of the petitioner for the delay and thus condoned it. The respondent was ordered to make the payment within four weeks, failing which they would be liable to pay interest at 12% per annum from the date of the order until payment is made.

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