2020 (11) TMI 15 - AT - Customs

Refund of SAD - N/N. 102/2007-Cus. dated 14.09.2007 - Violation of notification condition - rejection on the ground that the imported oats have been re-packed, fumigated and affixed with brand name and not sold as such - rejection on the ground of time limitation - levy of penalty u/s 114AA of the Customs Act, 1962 - HELD THAT - It can be seen from the above Notification that there is no condition that the goods imported have to be sold as such. The word used is subsequent . Thus, when an assessee pays VAT on the subsequent sale of imported goods, he may file an application for refund of the SAD paid at the time of import - In the present case, the appellant has done the processes of re-packing, fumigation, affixation of brand name, etc. The Department has denied refund alleging that such processes amount to manufacture and that the goods have not been sold as such. The Hon ble High Court of Gujarat in the case of AGARWALLA TIMBERS (P) LTD., MITTAL TIMBERS PRODUCTS (P) LTD., VARIETY LUMBERS (P) LTD. AND ASHIRWAD IMPEX (P) LTD. VERSUS CC 2013 (11) TMI 1013 - GUJARAT HIGH COURT had held that the assessee was eligible for refund of SAD paid on imported timber logs even if the logs were cut to size for subsequent sale. The appeal filed by the Department against the said decision of the Hon ble Gujarat High Court was dismissed on merits, affirming the view taken by the Hon ble High Court, in COMMISSIONER OF CUSTOMS VERSUS VARIETY LUMBERS PVT. LTD. 2018 (6) TMI 1499 - SUPREME COURT - Thus, the rejection of refund claim alleging that the goods were not sold as such is unsustainable in law. Time Limitation - ground for rejection of refund is that the refund claims were filed beyond one year from the date of payment of SAD and therefore, are barred by limitation - HELD THAT - Sub-clause (c) of the Notification, as reproduced in paragraph 6.1 of this order, would show that the refund claim has to be filed before the expiry of one year from the date of payment of additional duty of Customs - The issue of time limit for filing refund claim was subject matter of litigation before the Hon ble High court of Delhi in the case of SONY INDIA PVT. LTD. VERSUS THE COMMISSIONER OF CUSTOMS 2014 (4) TMI 870 - DELHI HIGH COURT The Hon ble High Court in the said judgement held that the time period prescribed in the Notification has to be read down. The SLP filed by the Department before the Hon ble Apex Court in COMMISSIONER VERSUS SONY INDIA PVT. LTD. 2016 (11) TMI 500 - SC ORDER , against such judgement was dismissed on the ground of limitation, leaving the question of law open. Thus, refund claim under Notification No. 102/2007-Cus. cannot be rejected as time-barred even if it is filed beyond the period of one year from the date of payment of additional duty - the rejection of refund on the ground of limitation cannot be sustained. Penalty u/s 114AA of the Customs Act, 1962 - HELD THAT - We do not understand the logic of imposing penalty in an application for refund. This apart, it has been pointed out by the Learned Counsel for the appellant that there is no proposal in the Show Cause Notice to impose penalty. The imposition of penalty is without any ground and is, therefore, fully set aside. The impugned order rejecting the refund claims is set aside - Appeal allowed - decided in favor of appellant.

Summary

Issues Involved:
1. Whether the imported oats were sold "as such" after repacking, fumigation, and affixing a brand name.
2. Whether the refund claims were time-barred.
3. Imposition of penalty under Section 114AA of the Customs Act, 1962.

Detailed Analysis:

1. Sale of Imported Oats "As Such":
The appellant imported oats in bulk from Australia, repacked them into smaller retail packs after fumigation, and resold them domestically. The Department rejected the refund claims on the grounds that the oats were not sold "as such" due to the repacking, fumigation, and branding processes, which were considered manufacturing activities under Section 2(f)(iii) of the Central Excise Act, 1944.

The Tribunal noted that Notification No. 102/2007-Cus. does not require goods to be sold "as such" but rather "for subsequent sale." The Tribunal referenced several cases, including M/s. Kanam Latex Industries (P) Ltd. and M/s. Vijirom Chem. Pvt. Ltd., which established that processes like repacking and sterilization do not change the character of the goods. The Tribunal concluded that the processes undertaken by the appellant did not amount to manufacture and thus, the rejection of the refund claim on this ground was unsustainable.

2. Time-Barred Refund Claims:
The Department also rejected the refund claims for seven Bills-of-Entry as they were filed beyond the one-year limitation period prescribed by Notification No. 93/2008-Cus. The appellant argued that the Delhi High Court in M/s. Sony India Pvt. Ltd. had set aside this time limitation, and the Tribunal should follow this precedent.

The Tribunal acknowledged conflicting decisions from different High Courts on this issue but chose to follow the Delhi High Court's decision, which held that the limitation period cannot start before the sale and submission of relevant documents. Consequently, the Tribunal held that the rejection of refund claims on the ground of limitation was not sustainable.

3. Imposition of Penalty:
The Department imposed a penalty of ?25,00,000 under Section 114AA of the Customs Act, 1962, alleging suppression of facts regarding the processing activities done by job workers. The Tribunal found no basis for imposing a penalty in a refund claim application. Moreover, the Show Cause Notice did not propose any penalty, rendering the imposition of the penalty without grounds. Thus, the penalty was fully set aside.

Conclusion:
The Tribunal set aside the impugned order, allowing the appeal with consequential benefits, and upheld the appellant's entitlement to the refund of SAD paid on the imported oats. The Tribunal also dismissed the contention regarding the change in the refund amount as it was not raised in the appeal grounds. The appeal was allowed, and the order was pronounced in the open court on 29.10.2020.