2021 (12) TMI 686 - HC - Customs

Refund - Concessional rate of duty - import of Prawn feed shrimp larvae feed and fish feed in pellet form, powder form etc. - exemption under duty vide serial No.107 of custom notification No.12/2012 dated 17.03.2012 as amended from time to time - HELD THAT - The impugned communication, the notifications and the communications of the DRI which led to the petitioner paying the amount, are perused. At the outset it may be mentioned the impugned communication cannot be construed as an order. It was incumbent on the part of the respondent to issue a proper show cause notice to the petitioner to show cause as to why refund claimed should not be rejected under one of the grounds. The documents filed by the petitioner indicates that the imports were made by the petitioner long before the amounts were paid by the petitioner pursuant to DRI Investigation. The amounts paid by the petitioner during the investigation has to be treated as amount paid under protest . Therefore, the question of filing an appeal against the respective Bills of Entry cannot be countenanced. In any event, merits of the refund claim of the petitioner would require a proper determination on facts and therefore, the second respondent was required to issue proper show cause notice to the petitioner giving the reasons why refund claim filed by the petitioner should not be rejected. Rejection of the refund claim of the petitioner merely based on a intra-departmental communication is not sufficient. There is no other option to remit the case back to the second respondent to issue a proper show cause notice to the petitioner preferably within a period of 60 days from date of receipt of this order setting out the grounds as to why the refund claim of the petitioner should not be rejected - Petition allowed.

Summary

Issues:
Challenge to rejection of refund claim based on communication from Directorate of Revenue Intelligence, Mumbai Zone; Interpretation of Customs Act, 1962; Principles of natural justice; Authority of Directorate of Revenue Intelligence to demand tax or appropriate amounts paid; Appeal against assessment under Bills of Entry; Rejection of refund claim without proper show cause notice.

Analysis:
1. The petitioner challenged the rejection of their refund claim based on a communication from the Directorate of Revenue Intelligence, Mumbai Zone. The petitioner contended that the rejection was contrary to Section 27 of the Customs Act, 1962 and violated principles of natural justice by not issuing a show cause notice. The petitioner argued that payments were made after imports, and thus, the need for an appeal against the assessment under the Bills of Entry did not arise. The petitioner also claimed that the duty was paid at 5%, as declared in the Bills of Entry, and hence, no appeal was necessary against the completed assessments.

2. The petitioner's counsel argued that the amount paid in response to the Directorate of Revenue Intelligence's summons should be considered as paid under protest. Referring to a recent Supreme Court decision, the counsel contended that the Directorate of Revenue Intelligence had no authority to demand tax or appropriate payments made by the petitioner, negating the need for invoking Section 28(2) of the Customs Act, 1962.

3. On the other hand, the respondents defended the rejection of the refund claim by stating that assessments were completed during import, and since no appeal was made against the Bills of Entry, the rejection was justified. Citing a Supreme Court decision, the respondents argued that the petitioner's failure to challenge the summons issued by the Directorate of Revenue Intelligence weakened the merit of the writ petition.

4. The court observed that the impugned communication should have been preceded by a proper show cause notice to the petitioner. The court noted that the payments made during the investigation should be considered as made under protest, eliminating the need for an appeal against the Bills of Entry. The court emphasized the necessity of a proper determination of the refund claim on its merits, requiring a valid show cause notice with reasons for rejection.

5. Consequently, the court directed the case to be remitted back to the second respondent for issuing a proper show cause notice to the petitioner within 60 days, outlining the grounds for potential rejection of the refund claim. The petitioner was given the opportunity to respond, followed by a personal hearing. The second respondent was instructed to pass appropriate orders on the merits and in compliance with the law within 30 days after the hearing.

This comprehensive analysis covers the issues raised in the legal judgment, providing a detailed breakdown of the arguments presented by both parties and the court's decision and reasoning in each aspect of the case.