2014 (12) TMI 361 - HC - Customs

SEZ - Jurisdiction of authority to entertain refund claim - Which authority would be competent to entertain and dispose of the refund claims of units situated within the Special Economic Zones which claims arise out of over payments of customs duty, redemption fine or penalties under the Customs Act, 1962 - Held that - without making statutory changes, it was simply not possible for the Ministry of Finance by a mere communication to stop the Commissioner of Customs from processing refund claims which was his statutory duty. Secondly, if such mechanism was to be changed for SEZ units from the authorities of the Customs Commissionerate to Commissionerate(SEZ), there had to be matching provisions providing such mechanism under the SEZ law. This admittedly was not done. In fact, till date it has not been done. Thirdly, all the refund claims, appeals and reviews were to returned with an advise to approach the Ministry of Commerce. We may recall this communication was issued by the Ministry of Finance. We wonder what Ministry of Commerce would do with such refund applications, appeals and reviews. There is no clarification whatsoever in this connection. The Ministry of Commerce per se did not have any statutory power either to process the refund claims or entertain appeals or reviews. The powers can be shifted into another authority if a valid law is made in order to do so. By a mere letter, Ministry of Finance could not have suspended the power of Commissioner(Customs) to exercise his statutory functions. It is undisputed that duty was collected by the Commissioner of Customs. Whatever be the character of the duty, the Commissioner of Customs collected the same on a perceived opinion that unit concerned was required to pay such customs duty, redemption fine or penalties as the case may be. If later on such duty, fine or penalty is declared illegal, the person from whom the same has been collected would have a right to seek refund thereof. Such right would be covered by statutory provisions particularly, section 27 contained in the Customs Act, 1962. Such refund application would have to be made within the time permitted under section 27 of the Customs Act, 1962. It may also be subject to verification on the question of unjust enrichment. Many issues may arise which are not clear to us. But one thing is clear that such issues can be decided only by the authority under the Customs Act. Directives issued by the Ministry of Finance in its letter dated 1.11.2012 are invalid and would have no force of law. It is declared that unless proper mechanism is framed under the SEZ laws and statutory provisions are enacted/amended, the Commissionerate of Customs would continue to hold the authority under section 27 of the Customs Act, 1962 to entertain refund claims of excess payment of customs duty, redemption fine or penalties as the case may be, adjudicated and collected by the Customs authority under the Customs Act, 1962, even with respect to units situated in SEZ areas. Whatever refund claims being returned to the petitioners by the Customs Commissionerate, the petitioners would represent the same to the appropriate authority. If the petitioners do so latest by 15.12.2014, all such applications shall relate back to the first presentation before the Customs authority. The period of limitation for presenting such application and computation of interest in case eventually the refund is granted, shall be reckoned from such date.

Issues Involved:
1. Competent authority for refund claims of SEZ units.
2. Misdeclaration and undervaluation of imported goods.
3. Confiscation and penalty imposition.
4. Jurisdictional conflict between Customs Act and SEZ Act.
5. Refund application processing and statutory provisions.

Issue-wise Detailed Analysis:

1. Competent Authority for Refund Claims of SEZ Units:
The central question was determining the competent authority to entertain and dispose of refund claims of units within Special Economic Zones (SEZ) arising from overpayments of customs duty, redemption fine, or penalties under the Customs Act, 1962. The respondents created a situation where no authority was accepting such refund claims, neither the Commissioner (Customs) nor the SEZ authorities.

2. Misdeclaration and Undervaluation of Imported Goods:
In Special Civil Application No.11876/2014, the petitioner, a SEZ unit, imported goods declared as used garments. The Commissioner of Customs disputed the valuation and the declaration, issuing a show cause notice alleging undervaluation and misdeclaration. The Commissioner confirmed misdeclaration and undervaluation, ordering confiscation and imposing penalties.

3. Confiscation and Penalty Imposition:
The Commissioner of Customs confirmed the misdeclaration and undervaluation, redetermined the value, ordered confiscation of goods, imposed a redemption fine, and penalties on the firm and its partner. The Tribunal partially allowed the petitioner's appeal, setting aside the Commissioner's order regarding goods in conformity with the letter of authority but upheld the confiscation of misdeclared goods.

4. Jurisdictional Conflict Between Customs Act and SEZ Act:
The Ministry of Finance's letter dated 1.11.2012 led to a situation where neither the Customs Commissioner nor the SEZ authorities could process refund claims due to the lack of explicit provisions in the SEZ Act. The Ministry suggested approaching the Department of Commerce, but this approach was deemed incorrect as it lacked statutory backing.

5. Refund Application Processing and Statutory Provisions:
The petitioners applied for a refund of Rs. 25 lakhs deposited during adjudication. The Customs authorities initially requested further documents but ultimately denied processing the refund, citing the Ministry of Finance's directive. The SEZ authorities also refused, citing the absence of statutory provisions. The Court held that the Ministry's directive was invalid, and the Commissionerate of Customs retained the authority under section 27 of the Customs Act to entertain refund claims.

Conclusion:
The Court declared the Ministry of Finance's directives invalid, emphasizing that without statutory changes, the Commissionerate of Customs must continue to process refund claims under section 27 of the Customs Act, 1962, even for SEZ units. The Court directed that refund applications returned to petitioners by the Customs Commissionerate should be represented to the appropriate authority, and the period of limitation would relate back to the initial presentation date. All petitions were disposed of accordingly.

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