2019 (5) TMI 270 - AT - Customs

Refund of excess paid duty in cash - case of Revenue is that the excess duty paid through FPS licence dt. 26/08/2013 can be refunded by way of recredit in the license and not in cash - HELD THAT - The observation of the Commissioner(Appeals) in the impugned order that the appellant has claimed the refund by way of recredit in the licence is factually incorrect because in the application for refund, which is on record, it is nowhere mentioned that the appellant has claimed the refund by way of credit whereas the fact of the matter is that the appellant has filed the application seeking refund of the excess duty paid by them by debit in the license No.1510019864 dt. 26/08/2013 which was left over while considering the amount of duty paid. Further, it is found that the whole situation has arisen due to the fact that licence was debited but the same was not reflecting in the system and as a result the appellant had to pay in cash. Subsequently, mistake was detected but the authorities did not correct the same on their own but the appellant was compelled to seek refund - It is a settled law that the Department cannot take advantage of its own wrong. Appeal allowed - decided in favor of appellant.

Summary

Issues:
Refund claim for excess paid duty on import of petroleum coke, refund in cash vs. recredit in license, applicability of Circular No.6/2008, judicial precedents on refund mode, correction of system error leading to cash payment, Department's advantage of own wrong.

Analysis:
The appeal pertains to a refund claim of excess paid duty on the import of petroleum coke, where the appellant sought refund in cash due to a technical error in the system. The Commissioner(Appeals) allowed the Department's appeal, setting aside the Order-in-Original granting cash refund. The appellant contended that the excess duty was paid in cash as the debit in the license was not reflected due to a technical error. The appellant argued that the Circular No.6/2008, relied upon by the Commissioner(Appeals), was ultra vires of the Customs Act based on the case law of Allen Diesels India Pvt. Ltd. vs. UOI. Additionally, the appellant highlighted the validity period of the FPS scrip and the absence of provisions for extension, supporting the claim for cash refund over recredit.

The Department, on the other hand, defended the recredit mode for excess duty paid through FPS license, citing Circular No.6/2008 and judicial precedents like Milton Laminates Ltd. vs. CC, Kandla and CCE, Indore vs. Midland Plastics Ltd. The Department contended that the refund should be by way of recredit in the license, not in cash.

Upon review, the Tribunal found that the appellant had indeed made excess duty payment in cash due to a system error. The Tribunal noted that the Commissioner(Appeals)'s observation regarding the refund mode was factually incorrect, as the appellant had sought refund by debit in the license, not recredit. The Tribunal also held that the Circular No.6/2008 was ultra vires based on legal precedent. The Tribunal distinguished the cited cases of Milan Laminates Ltd. and Midland Plastics Ltd., where entire duty payment was through scrip, unlike the present case involving a cash component. The Tribunal emphasized that the Department cannot benefit from its own error, citing established legal principles from various cases.

Conclusively, the Tribunal found the impugned order unsustainable in law and allowed the appeal, setting aside the Commissioner(Appeals)'s decision. The appellant was granted consequential relief, if any, with the operative portion of the order pronounced in open court on 25/04/2019.