2017 (2) TMI 1134 - AT - Customs

Refund claim - unjust enrichment - nexus between the import price and the purchase order price negotiated with the Department of Telecommunication/ MTNL - excess payment of customs duty because of wrongly invoiced consignments from the supplier - Held that - the assessments were made provisionally subject to SVB clearance of the invoice values at which the appellant has undertaken imports from their principals. In fact, it is further on record that the refund claim originally filed by the appellant on 21.4.1997 was returned to them by the departmental officers with the direction to re-file it after the finalisation of the provisional assessments. In any case, it is settled law that once an assessment is provisional, it is provisional for all purposes and not necessarily provisional in respect of the particular ground considered as has been held by the Hon ble High Court of Madras in the case of Collector Central Excise vs. India Tyre & Rubber Co. Ltd. 1997 (1) TMI 100 - HIGH COURT OF JUDICATURE AT MADRAS - Refund allowed. However, the CVD component of the excess duty is to be deducted from the total refund claim since the same has already been availed as CENVAT credit by the appellant in their manufacturing process - appeal allowed - decided partly in favor of appellant.

Summary

Issues Involved:
1. Excess customs duty payment and refund claim.
2. Provisional assessments and finalization.
3. Applicability of the doctrine of unjust enrichment.
4. Legal provisions under Sections 18 and 27 of the Customs Act.
5. Deduction of CVD component from the refund claim.

Detailed Analysis:

1. Excess Customs Duty Payment and Refund Claim:
The appellant, engaged in manufacturing telecommunication equipment, imported equipment from their principal abroad during November 1995 to February 1996. They claimed an excess customs duty payment due to the foreign supplier invoicing the goods at a higher rate than the contracted price. The initial refund claim of ?6,76,84,559/- was submitted on 21.4.1997, which was returned by the department for resubmission post-finalization of provisional assessments.

2. Provisional Assessments and Finalization:
The imports were provisionally assessed due to the relationship between the appellant and the foreign supplier, requiring Special Valuation Branch (SVB) scrutiny. The assessments were finalized on 23.4.1998, and the refund claim was resubmitted on 8.1.1999. The department issued a show-cause notice on 14.10.1999, proposing rejection of the refund on grounds of time bar and non-maintainability due to the absence of an appeal against the finalization order.

3. Applicability of the Doctrine of Unjust Enrichment:
The original authority rejected the refund claims, which was upheld by the Commissioner (A) on 13.2.2002, citing that the refund should be credited to the Consumer Welfare Fund due to the passing of the duty incidence to customers. The CESTAT, on 4.1.2005, remanded the case to the Commissioner (A) to re-examine unjust enrichment. The Commissioner (A), in de novo proceedings on 24.4.2005, rejected the refund claims again, stating the appellant had taken MODVAT credit and passed on the duty burden.

4. Legal Provisions Under Sections 18 and 27 of the Customs Act:
The appellant argued that Section 18, as amended in 2006, introduced the test of unjust enrichment, which should not apply to their case since their imports were prior to the amendment. They cited decisions from the Gujarat and Karnataka High Courts supporting that the doctrine of unjust enrichment does not apply to provisional assessments before the 2006 amendment. The Tribunal noted the Karnataka High Court’s decision in Mangalore Refinery & Petrochemicals Ltd. vs. CCE, Mangalore, which clarified that unjust enrichment was not applicable to refunds under Section 18 before the amendment.

5. Deduction of CVD Component from the Refund Claim:
The appellant conceded that the CVD component of the refund claimed should be deducted as it was availed as CENVAT credit in their manufacturing process. The Tribunal agreed, directing the deduction of the CVD component from the total refund claim.

Conclusion:
The Tribunal concluded that the rejection of the refund on the grounds of unjust enrichment was unjustified based on the settled position of law by the Karnataka High Court. The impugned order was set aside, and the appeal was allowed, directing the refund to be paid in cash to the appellant, after deducting the CVD component.

Order Pronounced:
(Order pronounced in Open Court on 13/02/2017)