2017 (12) TMI 846 - HC - Customs

Refund claim of duty paid but actual export could not take place - time limitation - export of goods in terms of the shipping bill - It is the case of the petitioner that the export actually could not take place for the reasons which we are not directly concerned with - case of Revenue is that the application for refund of the duty was filed beyond a period of one year from the payment of duty and the application was thus, hit by the limitation prescribed under section 27 of the Customs Act. Held that - the export of goods would take place upon the same being taken out of India to a place outside India. The definition of exporter under section 2(20) of the Customs Act would make it clear that there is a clear distinction between the stage when the goods meant for export are entered for export and they are actually exported. During this period, any owner, beneficial owner or any person holding himself out to be so, would be considered as an exporter. Subsection (1) of section 12 authorizes the Customs authorities to levy customs duty at the prescribed rates for goods imported into or exported from India. Thus, the incident of levying of customs duty is on export of goods. It is however true that in terms of subsection (1) of section 16 of the Customs Act, the rate of duty and tariff valuation would be determined as applicable to any export goods on the date on which, upon such goods being entered for export, the proper officer makes an order permitting clearance and loading of the goods for exportation under section 51. Reverting back to the facts of the case with this statutory scheme in mind, what actually happened was that the petitioner applied for permission of export of filing shipping bills and depositing self assessed tax. The Customs authorities satisfied that all the requirements are fulfilled, granted permission for export as envisaged under subsection (1) of section 51. However, the export never took place. The assessment of tax be it self assessed or assessed by the Customs authorities would be in terms of section 16 on the basis of the valuation and rate applicable at the time of entry of goods for export. The levying of tax however, would be under section 12 upon the actual export of goods. Subsection (1) of section 51 does require that before the proper officer grants permission for export of goods, he would have to be satisfied that the exporter had to be paid the duty assessed on such goods and other charges payable under the Act. Naturally since the permission for export cannot be granted unless the duty is actually paid, nevertheless, the amount so deposited would be appropriated towards duty only upon exportation of the goods. Under subsection (1) of section 27, the person claiming any refund of the duty or any interest thereof paid or borne by him can make an application in prescribed form to the competent authority before expiry of one year from the date of duty or interest thereof. If the amount deposited by the petitioner is treated as a duty paid and literal interpretation of subsection (1) of section 27 is adopted, the authorities perhaps would right in contending that the application for refund was beyond the period of limitation prescribed. However, such interpretation would lead to anomalous and unintended consequences and must be avoided. In the present case, the petitioner s right to seek refund or in other words the cause for filing application for refund arose only when the export actually failed. Till then, he petitioner could not have applied for return of amount already deposited. If in the meantime, as in the present case, more than a year is passed, the literal interpretation of application of subsection (1) of section 27 would amount to a situation where the cause of action for filing refund application even though had not arisen within one year from the date of deposit of the duty, the applicant for refund would be told that his refund application is barred by limitation. Applicability of section 26 - Held that - In the present case, the goods were never exported. Even otherwise, clauses (a) and (b) of section 26 cover entirely different situations. Under clause( a), the duty would become refundable on the goods being returned after exportation. Otherwise then by resale. Clause( b) would cover a situation where the goods are reimported within one year from the date of exportation. The right of the petitioner to seek return of the amount deposited while filing the shipping bill thus stems from the fact that the anticipated export never took place. Refund allowed with interest - petition allowed - decided in favor of petitioner.

Summary

Issues Involved:
1. Refund of wrongly withheld export duty.
2. Application of limitation under Section 27 of the Customs Act.
3. Interpretation of statutory provisions related to export duty and refund.

Issue-wise Detailed Analysis:

1. Refund of wrongly withheld export duty:
The petitioner, a private limited company engaged in export, sought a refund of ?1,45,39,200, which was deposited as export duty for a shipment that never took place. The petitioner initially filed a shipping bill on 17.11.2011 and paid the export duty on 05.12.2011. Due to delays, the export was canceled, and the petitioner later sought to export the goods at a higher value and a revised duty rate of 30%. The Customs authorities canceled the original shipping bill on 23.01.2013 and allowed the petitioner to file new shipping bills, leading to the actual export of the goods. The petitioner then applied for a refund of the initial duty payment, which was rejected by the Deputy Commissioner of Customs on grounds of limitation.

2. Application of limitation under Section 27 of the Customs Act:
Section 27 of the Customs Act stipulates that any refund claim must be made within one year from the date of payment of duty. The Customs authorities and the Tribunal upheld the rejection of the refund application, citing that it was filed beyond this one-year period. However, the petitioner argued that the duty paid was not for an actual export, as the shipment never took place. Therefore, the deposit did not constitute customs duty, and the limitation period should not apply. The Court agreed with the petitioner, stating that the right to seek a refund arose only when the export failed, making the literal application of the one-year limitation period inappropriate and unjust.

3. Interpretation of statutory provisions related to export duty and refund:
The Court examined various statutory provisions, including Sections 2(18), 2(20), 12, 16, 26, and 27 of the Customs Act. It noted that export duty is levied on the actual export of goods, not merely on filing a shipping bill. The Court emphasized that the duty paid upon filing the shipping bill and obtaining the LET order does not become final until the goods are exported. The Court also referred to Section 26, which provides for a refund of export duty in specific cases, none of which applied here since the goods were never exported. The Court concluded that the petitioner was entitled to a refund as the anticipated export did not occur, and the deposit could not be treated as duty paid.

Conclusion:
The Court set aside the impugned orders and directed the respondent to refund the sum of ?1,45,39,200 to the petitioner, along with statutory interest. The Court also acknowledged that while a Tax Appeal could be filed against the CESTAT judgment, the writ petition was entertained due to the peculiar facts and prolonged delay in payment. This decision underscores the importance of a purposive interpretation of statutory provisions to avoid unjust outcomes and ensure that taxpayers are not unduly burdened.