2019 (9) TMI 802 - SC - Customs

Maintainability of Refund claim - order of assessment in appeal not challenged - whether in the absence of any challenge to the order of assessment in appeal, any refund application against the assessed duty can be entertained? Whether in the case of self-assessment without passing a speaking order, it can be termed to be an order of self-assessment? - HELD THAT - In Escorts Ltd. v. Union of India Ors. 1994 (2) TMI 74 - SUPREME COURT the question arose for consideration as to the Bill of Entry classifying the imported goods under a certain tariff item and paying the duty thereon. This Court held that in such a case signing of the bill of entry itself amounted to passing an order of assessment. Hence, the application seeking a refund on the ground that imported goods fell under a different item attracting a far lower rate of duty, having been filed more than six months after the payment of duty, was rightly rejected as timebarred. What is of significance is that an entry made in the bill of entry has been held to be an order of assessment passed by the Assessing Officer. Thus, the endorsement made on the bill of entry is an order of assessment. It cannot be said that there is no order of assessment passed in such a case. When there is no lis, speaking order is not required to be passed in across the counter affair''. Procedure of assessment of duty as prevailed before the amendment of the Act prior to the amendment made in section 17(1) by the Finance Act of 2011 - HELD THAT - No doubt about it that the expression which was earlier used in Section 27(1)(i) that in pursuance of an order of assessment has been deleted from the amended provision of Section 27 due to introduction of provision as to self-assessment. However, as self-assessment is nonetheless an order of assessment, no difference is made by deletion of aforesaid expression as no separate reasoned assessment order is required to be passed in the case of self-assessment. It is apparent from provisions of refund that it is more or less in the nature of execution proceedings. It is not open to the authority which processes the refund to make a fresh assessment on merits and to correct assessment on the basis of mistake or otherwise. As the order of self-assessment is nonetheless an assessment order passed under the Act, obviously it would be appealable by any person aggrieved thereby. The expression Any person' is of wider amplitude. The revenue, as well as assessee, can also prefer an appeal aggrieved by an order of assessment. It is not only the order of reassessment which is appealable but the provisions of Section 128 make appealable any decision or order under the Act including that of self-assessment. The order of self-assessment is an order of assessment as per section 2(2), as such, it is appealable in case any person is aggrieved by it. There is a specific provision made in Section 17 to pass a reasoned/speaking order in the situation in case on verification, self-assessment is not found to be satisfactory, an order of reassessment has to be passed under section 17(4). Section 128 has not provided for an appeal against a speaking order but against any order which is of wide amplitude. The reasoning employed by the High Court is that since there is no lis, no speaking order is passed, as such an appeal would not lie, is not sustainable in law, is contrary to what has been held by this Court in Escorts. The provisions under section 27 cannot be invoked in the absence of amendment or modification having been made in the bill of entry on the basis of which self-assessment has been made. In other words, the order of self-assessment is required to be followed unless modified before the claim for refund is entertained under Section 27. The refund proceedings are in the nature of execution for refunding amount. It is not assessment or reassessment proceedings at all. When we consider the overall effect of the provisions prior to amendment and post-amendment under Finance Act, 2011, we are of the opinion that the claim for refund cannot be entertained unless the order of assessment or self-assessment is modified in accordance with law by taking recourse to the appropriate proceedings and it would not be within the ken of Section 27 to set aside the order of self-assessment and reassess the duty for making refund; and in case any person is aggrieved by any order which would include self-assessment, he has to get the order modified under Section 128 or under other relevant provisions of the Act. The applications for refund were not maintainable - Appeal dismissed.

Issues Involved:
1. Whether a refund application against the assessed duty can be entertained in the absence of any challenge to the order of assessment in appeal.
2. Interpretation of Section 27 of the Customs Act, 1962 regarding the necessity of an assessment order for filing a refund claim.
3. The impact of self-assessment under Section 17 of the Customs Act on the refund claims.
4. The necessity of modifying the order of self-assessment before entertaining a refund application.

Detailed Analysis:

Issue 1: Whether a refund application against the assessed duty can be entertained in the absence of any challenge to the order of assessment in appeal.

The Supreme Court examined whether a refund application could be entertained without challenging the assessment order in an appeal. The tribunal in the case of ITC Limited opined that a refund application against the assessed duty cannot be entertained unless the order of assessment is appealed. Conversely, the High Courts of Delhi and Madras opined that refund applications can be maintained even without filing appeals against the assessed bill of entry when there is no contest or lis and hence no adversarial assessment order. The Supreme Court upheld the tribunal's view, emphasizing that refund applications are not maintainable unless the order of assessment or self-assessment is modified in accordance with law.

Issue 2: Interpretation of Section 27 of the Customs Act, 1962 regarding the necessity of an assessment order for filing a refund claim.

The High Court of Delhi in Union of India vs. Micromax Informatics Ltd. noted an important change in Section 27, allowing a person to claim a refund of any duty or interest paid or borne by such person, without the conditionality of such payment being made pursuant to an order of assessment. However, the Supreme Court clarified that self-assessment is nonetheless an order of assessment, and the deletion of the expression "in pursuance of an order of assessment" in the amended Section 27 does not eliminate the requirement for an assessment order. The refund claim cannot be entertained without modifying the assessment order through appropriate proceedings.

Issue 3: The impact of self-assessment under Section 17 of the Customs Act on the refund claims.

The Supreme Court discussed the amended Section 17, which includes self-assessment as an assessment under the Act. The Court noted that self-assessment is subject to verification by the proper officer, who may reassess the duty if the self-assessment is found incorrect. The Court emphasized that the self-assessment is an order of assessment and is appealable under Section 128 of the Customs Act. The Court rejected the High Court's reasoning that no appeal lies against self-assessment due to the absence of a speaking order, affirming that any decision or order under the Act, including self-assessment, is appealable.

Issue 4: The necessity of modifying the order of self-assessment before entertaining a refund application.

The Supreme Court held that the provisions under Section 27 cannot be invoked without modifying the self-assessment order. The refund proceedings are in the nature of execution for refunding the amount and do not involve reassessment or adjudication of conditions for exemption. The Court emphasized that the refund application cannot be used to reopen or reassess the order of self-assessment. The order of self-assessment must be modified through appropriate appeal or reassessment proceedings before a refund claim can be entertained.

Conclusion:
The Supreme Court upheld the orders passed by the Customs, Excise, and Service Tax Appellate Tribunal and set aside the contrary judgments of the High Courts of Delhi and Madras. The Court concluded that refund applications are not maintainable without modifying the order of self-assessment or assessment through appropriate proceedings. The appeals were disposed of accordingly, with parties bearing their own costs.

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