2017 (7) TMI 551 - HC - Customs

Refund claim - Was the petitioner entitled in law, to straight away seek refund of duty without having the assessment order modified or revised? - Held that - In case, the duty qua the goods was re-assessed, and such re-assessment was not accepted in writing by the importer, or the exporter, the proper Officer under sub-section (5) of Section 17 of the Act, is required to pass a speaking order within fifteen (15) days from the date of re-assessment of the BE or the shipping bill, as the case may be - Furthermore, sub-section (6) of Section 17, authorizes the Proper Officer to audit the assessment of duty of imported goods or goods sought to be exported, at his office, or, at the premises of the importer or the exporter, as may be considered expedient, in cases, where, either re-assessment had not been done or a speaking order had not been passed on re-assessment. If, upon verification, examination or testing, the Proper Officer comes to the conclusion that the self-assessment is not done correctly, he is now empowered to re-assess the duty leviable on such goods. In case, the re-assessment, as carried out by the Proper Officer, whether with regard to valuation of goods, or classification, or examination, or concession of duty availed of, consequent to any notification, is different to what had been done via self-assessment procedure and the same is not accepted by the importer or the exporter, he is required to pass a speaking order within fifteen (15) days of such determination - The new regime, therefore, envisages a situation where self-assessment constitutes an order, if regard is had to the amended provisions of Section 17 read with Section 2(2) of the Act, which, includes within the definition of the term assessment, self-assessment. In view of the definitive stand taken in the counter affidavit by the respondents in the present case, that once, a protest was lodged, it was incumbent upon the Department to pass a speaking order, nothing further need to be said on this aspect. However, in the instant appeal, I must also deal with the stand taken by the respondents that no protest was lodged with it, as per the protest record maintained by the Department. Once, an application for refund is filed, it is incumbent on the authority concerned to pass an order under sub-section (2) of Section 27 of the Act, to determine whether whole or part of the duty and interest, if any, paid on such duty, by the applicant is refundable. The refund of duty or interest, if any, paid, is to be made to the applicant, if, it fulfills, the conditions set out in Section 27(2) of the Act. In case, conditions are not fulfilled, then, the duty and the interest, if any, paid on the duty, is to be credited to the Consumer Welfare Fund. Quite clearly, it was not as if the applications for refund contained is defect or were incomplete, as alleged or at all. The applications were returned on the ground that there was no order on record modifying or reviewing the rate of duty determined via the self-assessment mode. This conclusion of the second respondent, in view of what is stated above, is, clearly, wrong - the impugned order, in my view, is flawed in the eyes of law, even on this score. This is more so, in view of the fact that in the refund applications against the column, which requires the applicant to state whether or not personal hearing is required, the petitioner had indicated in no uncertain terms that it would require a personal hearing in the matter. Petition allowed by way of remand.

Issues Involved:
1. Premature refund applications
2. Requirement to challenge the assessment order
3. Jurisdiction of the refund section
4. Violation of principles of natural justice
5. Self-assessment and verification by customs authorities
6. Lodging of protest and passing of a speaking order
7. Comparative analysis of Sections 17 and 27 of the Customs Act, pre and post-amendment
8. Applicability of the Priya Blue Industries case
9. Requirement for personal hearing
10. Civil consequences of the impugned order

Issue-wise Detailed Analysis:

1. Premature Refund Applications:
The petitioner challenged the order dated 23.11.2015, which returned four refund applications as premature. The second respondent based this decision on the judgment in Priya Blue Industries Vs. Commissioner of Customs, asserting that a refund claim arises only if the self-assessment order is modified or revised.

2. Requirement to Challenge the Assessment Order:
The petitioner argued that post-amendment in 2011, there was no need to challenge the assessment order to claim a refund under Section 27 of the Customs Act. The petitioner contended that the deletion of the words "in pursuance of an order of assessment" allowed for a direct refund claim once duty was paid or borne.

3. Jurisdiction of the Refund Section:
The second respondent returned the applications, citing a lack of jurisdiction to process them. The petitioner argued that there was no provision in the Act for simply returning applications; the applications should either be allowed or rejected.

4. Violation of Principles of Natural Justice:
The petitioner claimed that the impugned order violated natural justice principles as no personal hearing was granted despite a specific request in the refund application. The Court agreed, noting that the order had civil consequences and thus required a hearing.

5. Self-assessment and Verification by Customs Authorities:
Post-amendment, Section 17 allowed for self-assessment by the importer/exporter, with optional verification by customs authorities. The petitioner argued that the customs authorities had the discretion to verify and re-assess but were not mandated to do so.

6. Lodging of Protest and Passing of a Speaking Order:
The petitioner lodged protests via letters and in the refund applications, claiming excess payment of CVD. The Court noted that once a protest is lodged, the proper officer must verify and pass a speaking order. The respondents' contradictory stance on this matter was highlighted.

7. Comparative Analysis of Sections 17 and 27 of the Customs Act, Pre and Post-amendment:
The Court analyzed the changes brought by the 2011 amendment, noting that self-assessment now included within the definition of assessment, and the proper officer's role in verification and re-assessment was discretionary. The amended Section 27 allowed for refund claims without the need to challenge the assessment order.

8. Applicability of the Priya Blue Industries Case:
The Court found that the reliance on Priya Blue Industries by the second respondent was misplaced, as the judgment was rendered before the 2011 amendment. The amended provisions allowed for a direct refund claim without challenging the assessment order.

9. Requirement for Personal Hearing:
The Court emphasized that the petitioner had requested a personal hearing in the refund applications, which was not granted, thus violating the principles of natural justice. The impugned order was flawed on this ground.

10. Civil Consequences of the Impugned Order:
The Court noted that the impugned order had civil consequences, and the petitioner's communication highlighting the fallacy in the order was not accepted by the respondents. The Court set aside the impugned order and directed the respondents to decide on the refund applications after granting a personal hearing.

Conclusion:
The writ petition was allowed, and the impugned order dated 23.11.2015 was set aside. The respondents were directed to take a decision on the refund applications in accordance with the law, after granting a personal hearing to the petitioner’s authorized representative. No order as to costs was made.

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