2008 (9) TMI 255 - AT - Customs

Furnishing of security in the shape of bank guarantee, or otherwise, has to be treated as payment of duty in anticipation of the finalization of the duty liability, and the same cannot be regarded as pre-deposit within the meaning of Section 129E of the Customs Act amount which stands appropriated on the discharge of security furnished by the importer at the time of provisional assessment u/s 18(1) cannot be treated as pre-deposit within meaning of Section 129E - Payment by way of appropriation of security/bank guarantee has to treated as payment of duty, so any amount found payable or refundable would be subject to S. 27 ibid including those relating to time limit for claiming refund and unjust enrichment

Summary

Issues Involved:
1. Encashment of bank guarantee as payment of duty.
2. Applicability of limitation for refund claims.
3. Doctrine of unjust enrichment.
4. Refund arising from appellate authority's order.
5. Compliance with judicial discipline and procedural guidelines.

Issue-wise Detailed Analysis:

1. Encashment of Bank Guarantee as Payment of Duty:
The appellant argued that encashment of the bank guarantee should not be regarded as payment of duty. However, the Tribunal noted that the bank guarantee was furnished in the context of provisional assessment and was encashed following the final order dated 28-5-1998. After encashment, the amount was credited to the Government account, ceasing to be a bank guarantee. The Tribunal held that the encashment of the bank guarantee in this context should be treated as payment of duty.

2. Applicability of Limitation for Refund Claims:
The appellant contended that the refund arising from the order-in-appeal dated 3-12-1999 should not be subject to the limitation period. The Tribunal, however, observed that the refund claim was filed on 31-7-2000, beyond the prescribed time limit. The Tribunal emphasized that Section 27 of the Customs Act, which governs the limitation period for refund claims, applies even when the refund arises from an appellate authority's order. The Tribunal upheld the findings of the Original Authority and Commissioner (Appeals) that the refund claim was time-barred.

3. Doctrine of Unjust Enrichment:
The Tribunal noted that the appellant had availed Modvat credit for a substantial portion of the disputed duty amount. The Original Authority had held that the appellant did not discharge the burden of proving that the duty burden had not been passed on, invoking the doctrine of unjust enrichment. The Tribunal agreed with this view, emphasizing that the appellant failed to establish that the duty burden had not been passed on to others, thus justifying the rejection of the refund claim on this ground as well.

4. Refund Arising from Appellate Authority's Order:
The appellant argued that the refund should be processed without considering the time limit or unjust enrichment since it arose from the appellate authority's favorable order. The Tribunal, however, distinguished between pre-deposit ordered by an appellate authority and the encashment of a bank guarantee furnished during provisional assessment. The Tribunal held that the refund claim must still comply with the provisions of Section 27, including the limitation period and the doctrine of unjust enrichment.

5. Compliance with Judicial Discipline and Procedural Guidelines:
The appellant accused the Deputy Commissioner of acting arbitrarily and violating principles of judicial discipline and commitments of the Board through the citizen's charter. The Tribunal did not find any merit in these allegations and upheld the decisions of the lower authorities as legal and proper.

Separate Judgments:

Member (Technical):
The Member (Technical) held that the refund claim was time-barred and that the appellant had not proven that the duty burden was not passed on. The appeal was rejected on these grounds.

Member (Judicial):
The Member (Judicial) disagreed, stating that the encashment of the bank guarantee should be treated as a pre-deposit, and upon the appellate authority's favorable order, the refund should be processed without considering the time limit or unjust enrichment. The appeal was allowed with consequential relief to the appellant.

Third Member (President):
The President agreed with the Member (Technical), emphasizing that the refund claim was subject to the limitation period and the doctrine of unjust enrichment. The appeal was dismissed.

Final Order:
In view of the majority opinion, the appeal was rejected.