2020 (2) TMI 1028 - HC - Customs

Refund of duty - petitioner's failure in producing the documentary evidences indicating that the petitioner has not passed on the duty burden to the consumers or end-users - principles of unjust enrichment - Entitlement of interest on delayed refunds. HELD THAT - This Court is of the considered view that the process involved in processing the refund casts serious duty upon the concerned officer to advert to the facts pleaded before the authority for coming to the conclusion that though refund is payable but the same is required to be deposited and paid in the Consumer Fund for want of any document or other evidence to indicate that the payment of refund would not result into unjust enrichment to the recipient. The order impugned unfortunately is absolutely silent qua the contention of the ONGC, which on the face of it, indicate that the machinery in question on which the duty was paid and duty was sought to be claimed as refund was not in any manner capable of being dealt with in or passing, so as to pass on the burden of duty to the consumer or end-user as there was no end-user or customer in the instant case. The authorities in uncanny avoidance to deal with this aspect has rendered the order vitiated and, therefore, decision of the authority qua depositing the amount into the consumer fund is required to be deprecated, quashed and set aside. The authority may be called upon to decide the aspect of payment of refund along with interest without further insisting upon any other material and based upon the material which has already been submitted and giving liberty to the petitioner to produce any material, if they so choose, and decide to make payment of refund with appropriate interest admissible under law within a period of 30 days from the date of receipt of writ of the Court - Petition allowed in part.

Issues Involved:

1. Legality of the orders dated 21st November 2017 and 16th July 2018 demanding additional documents for refund processing.
2. Entitlement of the petitioner to a refund of customs duty.
3. Examination of the doctrine of "unjust enrichment" in the context of the refund claim.
4. Entitlement of the petitioner to interest on the refund amount.
5. Proper procedure for processing the refund claim.

Issue-wise Detailed Analysis:

1. Legality of the Orders Demanding Additional Documents:
The petitioner challenged the orders dated 21st November 2017 and 16th July 2018, which required additional documents for processing the refund claim. The court noted that the respondent's demands for documents were continuous and led to significant delays. The petitioner argued that the requested documents were either already submitted or difficult to produce due to the age of the case. The court observed that the respondent's insistence on additional documents, despite the submission of substantial evidence, was unreasonable and contributed to the delay in processing the refund.

2. Entitlement to Refund of Customs Duty:
The court examined the petitioner’s entitlement to a refund of customs duty paid on imported equipment used for a turnkey project. The petitioner had paid customs duty on merit rates at the time of clearance and later sought a refund based on concessional rates. The competent authority eventually passed an order on 23.01.2017, allowing the benefit of exemption notifications and recognizing the petitioner’s entitlement to a refund. The court affirmed the petitioner’s right to the refund, noting that the final assessment of the bills of entry confirmed the excess duty paid.

3. Examination of the Doctrine of "Unjust Enrichment":
The court addressed the respondent's application of the doctrine of "unjust enrichment," which required the petitioner to prove that the duty burden was not passed on to consumers. The court found that the petitioner had submitted a Chartered Accountant’s certificate and other documents to support their claim. However, the respondent rejected the refund on the grounds that the petitioner failed to provide original ledgers and other documents to conclusively prove that the duty incidence was not passed on. The court criticized the respondent for not adequately considering the petitioner’s explanations and the available evidence, which indicated that the machinery was not intended for resale or passing on the duty burden.

4. Entitlement to Interest on the Refund Amount:
The petitioner claimed interest on the refund amount due to the delay in processing. The court noted that under Section 18(4) of the Customs Act, interest is payable if the duty is not refunded within three months from the final assessment. The court found that the petitioner’s refund application was delayed due to the respondent's repeated demands for additional documents. Consequently, the court held that the petitioner was entitled to interest on the refund amount, as the delay was attributable to the respondent’s actions.

5. Proper Procedure for Processing the Refund Claim:
The court emphasized the duty of the respondent to process the refund claim efficiently and fairly. The court found that the respondent’s handling of the refund claim was marked by unnecessary delays and an unreasonable demand for documents. The court directed the respondent to re-examine the refund claim based on the already submitted documents and any additional material the petitioner might provide. The court ordered the respondent to complete this process within 30 days and to pay the refund with appropriate interest.

Conclusion:
The court partly allowed the petition, quashing the orders that demanded additional documents and directing the respondent to process the refund claim within 30 days based on the existing evidence. The court also ruled that the petitioner was entitled to interest on the refund amount due to the delay caused by the respondent. The request for a stay on the order was rejected, considering the prolonged delay in processing the refund.

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