2018 (2) TMI 160 - AT - Customs

Refund of security deposit made towards the provisional assessment of Bills of Entry - unjust enrichment - Held that - Bills of Entry was provisionally assessed during the period 9.2.2004 to 2.12.2004 and the consignment was finally assessed by the Appraising Group VI on 23.5.2007. At the time of provisional assessment, there was no provision of unjust enrichment in case of a refund arising out of the final assessment in terms of Section 18 of the Customs Act, 1962 - as the provisional assessment was made in 2004, the unjust enrichment provision is not applicable. Once it is proved that the amount of refund has been shown as receivable, then it is not possible that the same amount could have been recovered by any other means. Therefore, the treatment of this amount shown as receivable is evidence that the incidence of refund amount has not been passed on. We direct the adjudicating authority before re-processing the refund as to make sure that the amount shown as receivable from Customs under the head of Loan and Advance covered the amount of present refund. If it is found correct then the appellant is prima facie entitled for the refund and such amount will not be hit by unjust enrichment - appeal allowed by way of remand.

Summary

Issues:
Refund application against security deposit for provisional assessment of Bills of Entry, unjust enrichment provision applicability, legality of refund based on C.A. certificate, adjudicating authority's decision on refund, appeal against Commissioner's dismissal.

Analysis:
The case involved a refund application by the appellant against a security deposit made for the provisional assessment of Bills of Entry in 2004, finalized in 2007. The refund was initially sanctioned but later credited to the Consumer Welfare Fund due to unjust enrichment concerns. The appellant challenged this decision through an appeal after the Commissioner's dismissal.

The appellant argued that the provision of unjust enrichment was not applicable at the time of provisional assessment, citing legal judgments such as Mafatlal Industries Ltd. vs. Union of India and Commissioner of Customs vs. Hindalco Industries Ltd. The appellant also presented a C.A. certificate indicating that the refund amount was booked in the balance-sheet as receivable from Customs, suggesting that the incidence of the refund amount was not passed on to others.

The Revenue, represented by the Assistant Commissioner, supported the findings of the impugned order regarding the refund.

Upon careful consideration, the Tribunal noted that at the time of provisional assessment in 2004, there was no provision for unjust enrichment in cases of refunds arising from final assessments. Legal precedents, including the judgments referenced by the appellant, supported this view. The Tribunal also observed that the appellant had shown the refund amount as receivable from Customs in their balance-sheet, indicating non-passing of the incidence of the refund amount.

The Tribunal disagreed with the adjudicating authority's contention that the amount shown as receivable did not certify non-recovery from customers, stating that once an amount is shown as receivable, it cannot be simultaneously recovered by other means. Consequently, the treatment of the amount as receivable was deemed evidence that the incidence of the refund amount was not passed on. The Tribunal directed the adjudicating authority to verify that the amount shown as receivable covered the present refund, and if confirmed, the appellant would be entitled to the refund without unjust enrichment implications.

The Tribunal allowed the appeal by remanding the case to the adjudicating authority for a fresh order, based on the above observations.