2015 (3) TMI 861 - HC - Customs

Denial of refund claim - Section 27 - Whether claim of refund arising out of final assessment to be made vide an application u/s 27 or the same has to be refunded immediately u/s 18 not requiring assessee to move an application bill of entries of import were provisionally assessed on 24.08.98 & 02.02.99 and duty was paid refund arised on final assessment on 21.06.99, 15.06.99 whether clause of unjust enrichment u/s 27(2) would be applicable - Held that - The assessee has paid provisional duty which gets reduced on final assessment. The assessee, therefore, becomes entitled to refund which is payable in terms of Rule 9B of the Excise Act, 1944 or Section 18 of the Act. For refund on this account, no application is required to be filed u/s 27 of the Act and therefore, sub-Section (2) relating to unjust enrichment is not applicable. Further, insertions vide sub-sections (3), (4) and (5) to Section 18 are effective from 13.07.06 and obviously are not applicable to the case in hand as they do not have retrospective effect. - Following decision of COMMISSIONER OF CUSTOMS Versus INDIAN OIL CORPORATION 2012 (1) TMI 31 - DELHI HIGH COURT - Decided in favor of assessee.

Issues Involved:
1. Entitlement to automatic refund of Extra Duty Deposit (EDD) without filing an application under Section 27 of the Customs Act, 1962.
2. Necessity of a refund application within the stipulated time.
3. Characterization of EDD as customs duty under Section 27 of the Customs Act.
4. Consistency of the refund claim with the Supreme Court decision in Mafatlal Industries Vs Union of India.

Issue-wise Detailed Analysis:

1. Entitlement to Automatic Refund of EDD:
The Tribunal held that the 1st respondent is entitled to an automatic refund of the EDD made pending the finalization of the provisional assessment without filing an application for refund under Section 27 of the Customs Act, 1962. The Tribunal noted that upon finalization of the assessment, the file was forwarded to the refund section for the refund of EDD. The statutory prescription entitles the assessee to a refund upon finalization of the assessment without the need for a formal claim.

2. Necessity of a Refund Application:
The Assistant Commissioner of Customs (Refund) initially rejected the refund claim, stating that no refund application had been filed as required under Explanation II to Section 27 of the Customs Act, which mandates filing within six months from the date of finalization of provisional assessment. However, the Commissioner (Appeals) and the Tribunal disagreed, emphasizing that EDD is a deposit to safeguard revenue interests and not a duty under Section 27. Therefore, the refund should be processed suo motu or upon a simple request, without necessitating a formal application.

3. Characterization of EDD as Customs Duty:
The Commissioner (Appeals) clarified that EDD is not a duty but a deposit to safeguard potential duty liabilities. The Tribunal upheld this view, stating that EDD does not partake the character of customs duty under Section 27. The Commissioner (Appeals) referenced the case of Suvidha Ltd. Vs UOI, where it was held that pre-deposit for availing the right of appeal is not a payment of duty and thus, not subject to refund application requirements under Section 11B of the Central Excises and Salt Act, 1944.

4. Consistency with Supreme Court Decision in Mafatlal Industries:
The Department argued that the Supreme Court decision in Mafatlal Industries Ltd. Vs Union of India should apply, which mandates refund claims to be filed under Section 27. However, the Court noted that the first situation envisaged in para-104 of the Mafatlal judgment applies, where any excess duty found upon finalization of assessment is to be refunded without the need for a formal claim. The Gujarat High Court in Commissioner Vs Hindalco Industries Ltd. and the Delhi High Court in Commissioner of Customs Vs Indian Oil Corporation affirmed this view, stating that refunds due upon finalization of provisional assessment do not require a formal application under Section 27.

Conclusion:
The Court concluded that the refund claim arose prior to the amendment of Section 18 of the Customs Act on 13.7.06, and thus, the provisions of Explanation II to Section 27 do not apply. The substantial questions of law Nos. 1, 2, and 4 were answered in favor of the assessee, affirming the entitlement to automatic refund of EDD without a formal application. Consequently, the issue raised in substantial question of law No. 3 was not addressed. The appeal was dismissed, and the appellant/Revenue was directed to pay statutory interest as per Section 27-A of the Customs Act.

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