2021 (4) TMI 598 - HC - Customs

Rejection of refund claim - Customs Duty paid in excess - period of limitation - refund application filed on 06.01.2010 by appellant before the Deputy Commissioner of Customs, Refund Section, Bangalore - compliance with the period of limitation specified under Section 27 of the Customs Act, 1962 or not - HELD THAT - In the present case, duty of customs payable on the transaction in question under the statute is ₹ 4,743/-, which has been admitted by the respondent and on account of erroneous calculation, the duty has been paid in excess to the tune of ₹ 42,26,975/-. The Authorities have turned down the claim of appellant on the ground of limitation. The claim of the appellant could have been corrected and the Tribunal has erred in observing that the payment of excess duty requires to be rectified under Section 154 of the said Act of 1962. The Authorities ought to have refunded the said excess amount to the appellant- Company either upon their application or on an application made by the importer. In the case of Mafatlal Industries Ltd. 1996 (12) TMI 50 - SUPREME COURT , it has been held that in order to claim excess duty paid, which falls outside the purview of the said Act of 1962, the limitation provided under Section 27 is not applicable. Hence, the appellant-company is certainly entitled for refund of duty. Thus, it is crystal clear that when the customs duty is paid in excess, the department is liable to refund the same and the limitation provided under Section 27 of the said Act of 1962 will not be applicable. Therefore, the Tribunal has erred in law and fact, solely relying on Section 27 of the said Act of 1962 while dismissing the application of the appellant-Company - this Court is of the considered opinion that the appellant was not at fault in the matter at all. M/s. BEML was directed to file refund application at the first instance. If the department would have advised the appellant to file an application for refund, then there would not have been any delay. The substantial questions of law are answered in favour of the appellant and against the revenue.

Issues Involved:
1. Applicability of Section 27 of the Customs Act, 1962 for refund claims.
2. Limitation period for filing refund claims under Section 27 of the Customs Act, 1962.
3. Applicability of Limitation Act for refund of duty paid without authority of law.
4. Doctrine of unjust enrichment in the context of refund claims.
5. Procedural errors and clerical mistakes in customs duty payments.

Issue-wise Detailed Analysis:

1. Applicability of Section 27 of the Customs Act, 1962 for refund claims:
The core issue was whether the authorities were correct in rejecting the refund application by applying Section 27 of the Customs Act, 1962. The Tribunal upheld the rejection, emphasizing that the refund claim was time-barred under Section 27. The appellant argued that the excess duty paid due to clerical error should not be subjected to Section 27's limitation period. The High Court concluded that the refund provisions under Section 27 were not applicable for amounts paid without authority of law, aligning with the Supreme Court's judgment in Mafatlal Industries Ltd. v. Union of India.

2. Limitation period for filing refund claims under Section 27 of the Customs Act, 1962:
The appellant's refund application was rejected as it was filed beyond the one-year limitation period specified under Section 27. The Tribunal maintained that the time limit must be strictly followed. However, the High Court determined that the limitation period under Section 27 did not apply to refunds of amounts paid without authority of law, and the applicable limitation was as per the Limitation Act.

3. Applicability of Limitation Act for refund of duty paid without authority of law:
The High Court referenced the Mafatlal Industries Ltd. case, which established that for refunds of amounts paid without authority of law, the Limitation Act's provisions apply rather than the one-year limit under Section 27. The appellant's payment of excess customs duty due to clerical error was deemed outside the purview of the Customs Act, thus making the Limitation Act applicable.

4. Doctrine of unjust enrichment in the context of refund claims:
The Tribunal and lower authorities initially rejected the refund claim on the grounds that the importer (M/s. BEML) had not borne the incidence of the customs duty, invoking the doctrine of unjust enrichment. However, the High Court noted that the appellant, acting as an agent for M/s. BEML, paid the duty on behalf of the importer. Since the excess payment was due to a clerical error, the doctrine of unjust enrichment was not applicable.

5. Procedural errors and clerical mistakes in customs duty payments:
The appellant's excess payment of customs duty resulted from an erroneous exchange rate application. The High Court acknowledged this clerical mistake and emphasized that such errors could be rectified under Section 154 of the Customs Act. The Court criticized the authorities for not advising the appellant to file the refund application promptly, which contributed to the delay.

Conclusion:
The High Court allowed the appeal, setting aside the Tribunal's order. It held that the refund of excess customs duty paid due to clerical error was not subject to the limitation period under Section 27 of the Customs Act, 1962. The Court directed that the appellant was entitled to the refund, emphasizing that the authorities should have facilitated the rectification of the clerical error and the subsequent refund process. The substantial questions of law were answered in favor of the appellant and against the revenue.

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