2017 (5) TMI 1178 - AT - Customs

Benefit of N/N. 39/96-Cus dated 23rd July 1996 - eligibility for duty-free import of conventional billet turning lathe - refund claim - unjust enrichment - Held that - Mere non-compliance with a procedural requirement cannot stand in the way of denial of substantive benefit to an assessee. Moreover, the state cannot enrich itself by collection of taxes that do not have the authority of law. On perusal of the bill of entry, it is seen that the appellant had sought the application of exemption under notification no.39/96-Cus and that this had been denied without espousing any reasons. It is clear that appellant was entitled to the exemption and ineligibility has not been cited as one of the grounds of appeal before the first appellate authority. It would, therefore, appear that the bill of entry had been wrongly assessed and required rectification. The appellant could have applied for, and obtained, rectification which would have eliminated the duty liability and, thereby, entitle them to refund arising from erroneous computation. The appellant is entitled to a refund as sanctioned by the original authority - appeal allowed - decided in favor of appellant.

Summary

Issues:
Challenge to order-in-appeal allowing refund claim on duty-free import eligibility under notification no.39/96-Cus; Contention of Commissioner of Customs (Import) regarding scrutiny of claim and unjust enrichment; Denial of refund by first appellate authority invoking bar of enrichment; Applicability of doctrine of unjust enrichment; Denial of refund without challenging assessment; Entitlement to exemption under notification no.39/96-Cus; Refund sanctioned without rectification of bill of entry; State enrichment through unauthorized tax collection.

Analysis:
The appeal was filed challenging the order-in-appeal allowing a refund claim on duty-free import eligibility under notification no.39/96-Cus. The appellant, Ordnance Factory, Ambajhari, sought a refund of duty paid after denial of exemption at the time of import. The Assistant Commissioner of Customs allowed the refund claim, but the Commissioner of Customs (Import) contended that the original authority failed to scrutinize the claim properly and that refund without challenging the assessment was against legal precedents. The issue of unjust enrichment was raised, with the first appellate authority denying the refund on this ground, citing the Customs Act, 1962, regarding the transfer of refund amounts to the Fund in cases of unjust enrichment.

The first appellate authority invoked the bar of enrichment to deny the refund, raising questions about the applicability of the doctrine of unjust enrichment. The authority held that the importer was not exempt from this doctrine as they sold products to agencies other than the Ministry of Defence. However, it was argued that the duties charged at the time of import were absorbed, as indicated by a 'no enrichment' certificate submitted by the appellant. The original authority noted this submission, suggesting no grounds for invoking the bar of unjust enrichment.

The denial of refund without challenging the assessment was also addressed. The appellant was entitled to exemption under notification no.39/96-Cus, but it was wrongly denied without proper reasons. The appellant could have rectified the bill of entry to eliminate duty liability, entitling them to a refund. The decision emphasized that procedural non-compliance should not obstruct substantive benefits to the assessee, and the state should not enrich itself through unauthorized tax collection.

In conclusion, the impugned order was set aside, and the appellant was deemed entitled to the refund as sanctioned by the original authority. The decision highlighted the importance of proper scrutiny, adherence to legal provisions, and ensuring rightful entitlements to avoid unjust enrichment and unauthorized tax collection.