2016 (5) TMI 439 - AT - Customs

Admissibility of refund of redemption fine and penalty - Redemption fine and penalties have been paid by the appellant and not by the 11 importers, and technically speaking the TR-6 challans have been issued in the name of the 11 importers - Revenue submitted that in terms of the provisions of Section 27 of the Customs Act, duty and interest, if any, paid on the goods can be claimed in a refund by any person who has paid or borne it. Held that - the order was passed against the importers (whether right or wrong) and the redemption fine and penalties were deposited by the importers by various TR-6 Challans in their name and the appeals were also filed by the importers before the Tribunal. Even before the Tribunal, the appellant never took a stand that redemption fine and penalties should not have been imposed upon them and the same should have been directed towards exporter of the goods. The appeal stands allowed on the merits of the case only. In such a scenario, the refund arising out of the said order of the Tribunal would be available to the importers only and the fact that whether the money for the said deposits were provided by the exporters or not, would make no difference. Section 27 of the Customs Act which relates to the refund of any duty and interest paid by an assessee, in terms of an order of assessment relates to payment of duty and interest only and does not cover the redemption fine and penalties. As such even if the redemption fine and penalty amounts were provided by the appellant to the various importers for further deposit of the same with the Revenue, it has to be considered as an internal arrangement between the exporter and importers and filing of the refund of the same by the exporter, even though the amounts were deposited by the importers, cannot be held to be justifiable inasmuch as there is no provision in the Customs Act to find out as to who has actually provided money to the person depositing the same. The law recognizes only the importers and by setting aside the redemption fine and penalties imposed upon them, it is the importers only who are recognized by law for the purpose of refund of the amounts in question. Therefore, no reason to interfere in the impugned orders. - Decided against the appellant

Summary

Issues Involved:

1. Classification of imported goods as Superior Kerosene Oil (SKO) or Aviation Turbine Fuel (ATF).
2. Liability for the redemption fine and penalties imposed on importers.
3. Entitlement to refund of redemption fine and penalties after the Tribunal's order.

Detailed Analysis:

1. Classification of Imported Goods as SKO or ATF:

The appellant, based in Dubai, supplied Superior Kerosene Oil (SKO) to 11 Indian importers. Upon receipt at Mangalore, the cargo was suspected to be Aviation Turbine Fuel (ATF) instead of SKO, prompting an investigation by the Directorate of Revenue Intelligence (DRI). Samples were tested, and proceedings were initiated against the appellant through a show cause notice. The Commissioner concluded that the cargo was ATF, not SKO, leading to the confiscation of the goods and the imposition of redemption fines and penalties on the importers.

2. Liability for the Redemption Fine and Penalties Imposed on Importers:

The Commissioner allowed the appellant to re-export the goods but imposed redemption fines and penalties on the importers. The appellant argued that since the importers abandoned the cargo and did not pay for it, the appellant remained the owner of the goods. Consequently, the appellant contended that the fines and penalties should not have been imposed on the importers. The Tribunal set aside the Commissioner's order, and the High Court of Karnataka confirmed this decision, rejecting the appeals filed by the Revenue.

3. Entitlement to Refund of Redemption Fine and Penalties After the Tribunal's Order:

Following the Tribunal's order, the importers became entitled to the refund of the fines and penalties they had deposited. The appellant claimed that they had remitted the fines and penalties on behalf of the importers and thus were entitled to the refund. The Commissioner rejected the appellant's refund claim, citing Section 27(1) of the Customs Act, 1962, which stipulates that refunds can only be granted to the person who has paid the amount. The Commissioner noted that the TR-6 challans were issued in the name of the importers, and some importers had objected to the refund being granted to the appellant.

The appellant argued that the Commissioner had recognized them as the owner of the goods and that they had borne the incidence of the fines and penalties. They cited the Supreme Court's decision in UOI v. Sampat Raj Dugar, which held that an exporter remains the owner of the goods if the importer abandons them. The appellant also referred to the doctrine of unjust enrichment, asserting that the Revenue should not retain the amount on technical grounds.

The Revenue countered that Section 27 of the Customs Act allows refunds only to the person who paid or bore the duty and interest. Fines and penalties, being penal in nature, cannot be transferred or refunded to another person. The Revenue argued that the importers, who had paid the fines and penalties, were entitled to the refund, not the appellant.

The Tribunal held that the refund claims should be filed by the importers, who had deposited the fines and penalties, as recognized by the TR-6 challans. The internal financial arrangements between the appellant and the importers were not relevant to the refund claims. The Tribunal concluded that the law only recognized the importers for the purpose of refund and rejected the appellant's appeal.

Conclusion:

The Tribunal upheld the Commissioner's decision, stating that the refund of redemption fines and penalties should be granted to the importers who had paid them, not to the appellant. The Tribunal emphasized that the Customs Act does not provide for the transfer of penal liabilities or refunds based on internal financial arrangements between parties. The appeal was rejected, reaffirming the legal principle that refunds are to be granted to the person who has borne the financial burden as per the statutory provisions.