1985 (4) TMI 73 - HC - Customs

Summary

Issues Involved:
1. Classification of Naphthalene for countervailing duty purposes.
2. Applicability of Section 27(1) of the Customs Act, 1962 for refund claims.
3. Jurisdictional error in levying countervailing duty.
4. Doctrine of unjust enrichment in the context of refund claims.
5. Award of interest on the refunded amount.

Summary:

1. Classification of Naphthalene for Countervailing Duty Purposes:
The petitioners imported 500 metric tonnes of Naphthalene, which they claimed was derived from coal-tar and not petroleum. They argued that it should be classified under residuary Item 68 of the Central Excise Tariff, which is exempt from countervailing duty u/s 3 of the Customs Tariff Act, 1975. The Assistant Collector of Customs, however, assessed it under Item 11A of the Central Excise Tariff, which pertains to petroleum products.

2. Applicability of Section 27(1) of the Customs Act, 1962 for Refund Claims:
The petitioners' refund application was rejected on the grounds that it was barred by the limitation period prescribed u/s 27(1) of the Customs Act, 1962. The court examined whether this section applied to the petitioners' claim, distinguishing between duties levied without jurisdiction and those levied under an error of law or fact.

3. Jurisdictional Error in Levying Countervailing Duty:
The court held that the Customs authorities acted without jurisdiction in levying countervailing duty on Naphthalene, as it was derived from coal-tar and not petroleum. This classification error went to the root of jurisdiction, rendering the levy of countervailing duty null and void. The court cited several precedents, including the Supreme Court's decision in Union of India v. Tarachand Gupta & Bros., to support this view.

4. Doctrine of Unjust Enrichment in the Context of Refund Claims:
The respondents argued that granting a refund would result in unjust enrichment for the petitioners. The court rejected this argument, noting that the petitioners imported Naphthalene for their own consumption and there was no evidence to suggest that the burden of duty was passed on to consumers. The court referred to the judgment in I.T.C. v. V. Chipkar, which held that a manufacturer cannot be denied a refund on the grounds of unjust enrichment if the duty was unlawfully collected.

5. Award of Interest on the Refunded Amount:
The petitioners requested interest at the rate of 18% per annum on the duty collected. The court awarded interest at the rate of 12% per annum from the date of the petition till payment, citing precedents such as Elpro International Ltd. v. Joint Secretary, Govt. of India and Metal Distributors Ltd. v. Union of India.

Conclusion:
The petition was allowed, and the rule was made absolute with costs. The court ordered the refund of the countervailing duty collected, along with interest at the rate of 12% per annum, to be paid within four weeks.