2015 (3) TMI 200 - AT - Customs

Rejection of refund claim - 100% EOU - Export of bonded goods - Duty free clearance of imported capital goods - Payment of duty without physical clearance of goods - After few weeks they located a customer abroad and decided to export the said machine. Accordingly they exported the machine on 22.1.2004 after obtaining due permission. While exporting the machine, they followed ARE1 procedure i.e. they filed ARE-1, the goods were examined by the jurisdictional Inspector and Superintendent prior to its clearance from the EOU and thereafter goods were allowed for export - The refund claim was rejected by the original authority on the ground that the machine was exported after de-bonding and the provisions of Section 27 of the Customs Act, 1962 was not applicable for sanctioning the said claim. Held that - It is observed that the goods were initially imported without payment of duty. The goods were taken to a 100% EOU which is the Customs bonded area under Section 58 of the Customs Act, 1962. The goods continued to be in the Customs bonded area. They filed the ex-bond Bill of Entry and paid the duty. Even though they paid the duty the goods were not physically removed from the bonded area. When the goods were exported the appellants did not follow the procedure prescribed under Section 69 of the Customs Act, 1962 but filed ARE1. ARE1 procedure is for the excisable goods domestically produced and is with reference to the excise duty and not with reference to Customs duty. Unfortunately even the jurisdictional Inspector and Superintendent did not realize this procedural irregularity and examined the goods and allowed the export under AREI. It appears that neither jurisdictional Superintendent and Inspector nor the appellant have realized that they are required to follow the procedure as stipulated under Section 69 of the Customs Act, 1962, as the goods were still bonded under Section 58 of the Customs Act, 1962 and ARE-1 procedure is applicable to excisable goods produced in India, which is not the case here. Had any one of them realized, this difficulty would not have arisen and the appellant would have got refund of Customs duty paid by them. Thus I find the appellant has not followed the procedure correctly. Even the Central Excise officials have not dealt with the correct procedure. On a query from the Bench, the learned advocate on the instructions from his clients stated that they would be willing to forgo the interest in view of the peculiar circumstances of the case if the refund is sanctioned. In the interest of justice, keeping in view the fact that they have been paid the said duty which was chargeable only if the goods were physically cleared for home consumption. The goods were not physically cleared for home consumption but were exported. For export of the goods no such duty was chargeable but the appellant was required to follow Section 69 procedure, I allow the appeal. The appellant would be entitled for the said refund claim subject to other requirements being satisfied. However, as undertaken by the appellant, no interest would be payable. - Decided in favour of assessee.

Summary

Issues:
1. Applicability of Section 27 of the Customs Act, 1962 for refund claim.
2. Eligibility for drawback under Section 74 of the Customs Act, 1962.
3. Correct procedure for export of goods from a Customs bonded area.

Analysis:

Issue 1:
The case involved a dispute regarding the applicability of Section 27 of the Customs Act, 1962 for a refund claim. The appellants, a 100% EOU, imported capital goods duty-free but later decided to clear a machine for home consumption by paying duty before exporting it. The Development Commissioner had agreed to de-bond the unit, and the machine was exported following the ARE1 procedure. The original authority rejected the refund claim citing Section 27, as the machine was exported after de-bonding. The Commissioner (Appeals) upheld the decision, suggesting the appellants should have claimed drawback under Section 74 instead. The Tribunal noted that the goods were not physically cleared for home consumption but exported, and the duty was chargeable only if physically cleared. As the goods were still bonded, the appellants were required to follow Section 69 procedure for export, not ARE1. The Tribunal allowed the appeal, stating the appellants were entitled to the refund claim without interest due to procedural errors by both parties.

Issue 2:
The second issue involved the eligibility for drawback under Section 74 of the Customs Act, 1962. The appellants approached the Custom House for drawback, but it was denied as the goods were exported on free shipping bills, not meeting the conditions of Section 74. The appellants argued that Section 74 did not apply since duty was exempt upon importation due to their 100% EOU status. The Tribunal agreed with the appellants, emphasizing that the goods were not physically removed from the bonded area even after duty payment. The Tribunal highlighted the procedural irregularity in using ARE1 for export instead of following Section 69 requirements for bonded goods. Despite the oversight by both the appellants and the authorities, the Tribunal allowed the refund claim, acknowledging the peculiar circumstances of the case and the duty paid unnecessarily.

Issue 3:
The final issue addressed in the judgment was the correct procedure for exporting goods from a Customs bonded area. The Tribunal emphasized that the goods remained in the bonded area even after duty payment and should have followed Section 69 procedure for export. The appellants' use of ARE1 for excisable goods produced in India was incorrect, and the jurisdictional officials failed to identify this procedural error. The Tribunal highlighted the importance of adhering to the prescribed procedures under the Customs Act to avoid such difficulties. Despite the procedural missteps, the Tribunal allowed the appeal, granting the refund claim to the appellants without interest, considering the unique circumstances of the case and the duty paid erroneously.

In conclusion, the Tribunal's judgment clarified the procedural requirements for claiming refunds, eligibility for drawback under Section 74, and the correct export procedures from a Customs bonded area, emphasizing the importance of adherence to statutory provisions to avoid complications and ensure fair treatment in customs matters.