1988 (3) TMI 74 - HC - Customs

Summary

Issues Involved:
1. Classification of imported parts under the Customs Tariff Act, 1975.
2. Applicability of exemption notifications to the imported parts.
3. Claim for refund of excess customs duty paid.
4. Issue of laches in filing the petition.

Summary:

1. Classification of Imported Parts:
The petitioners manufacture mechanical seals used exclusively in centrifugal pumps and compressors, importing various parts for this purpose. Prior to August 1976, these parts were classified under Tariff Item 72(3) of the Indian Customs Tariff Act, 1934. Post-2nd August 1976, with the new Customs Tariff Act, 1975, the petitioners sought classification of these parts under Tariff Items 84.10(1) or 84.11(1). Section XVI of Schedule 1 to the Customs Tariff Act, 1975, and Note 2 of the Notes to Section XVI were pivotal in determining that parts specifically designed for centrifugal pumps or compressors fall under Heading 84.10(1) or 84.11(1).

2. Applicability of Exemption Notifications:
Customs Notification No. 179 dated 4-9-1980, and its predecessor Notification No. 350 dated 2-8-1976, provided exemptions for parts required for the manufacture of articles falling under specified headings, including 84.10(1) and 84.11(1). The petitioners presented a certificate from the Commissioner of Industries, Gujarat, confirming the use of imported parts for manufacturing mechanical seals for centrifugal pumps and compressors. The court held that the parts imported by the petitioners qualify for the exemption under these notifications, as they are used exclusively for manufacturing mechanical seals falling under the specified tariff entries.

3. Claim for Refund of Excess Customs Duty Paid:
The petitioners claimed a refund of excess customs duty amounting to Rs. 36,77,455.56 for the period from July 1975 to 11th September 1981, but confined their claim from 2nd August 1976 onwards. The court found that the petitioners were entitled to a refund for the period of three years prior to the filing of the petition, i.e., from 7th April 1979 to 1st March 1986, as the duty was paid under a mistake of law.

4. Issue of Laches:
The petition was filed on 7th April 1982. The petitioners contended that they discovered the mistake of law on 16th July 1980 when they filed their first refund claim. However, the court noted the absence of particulars on how the mistake was discovered and ruled that the petitioners should get a refund for the period of three years prior to the filing date, considering it just and fair.

Conclusion:
The court directed the respondents to refund the excess customs duty paid from 7th April 1979 to 1st March 1986 within eight weeks of the petitioners furnishing a statement of refunds claimed. The interim assessments made under the court's order dated 27th July 1982 were to be finalized, and the bonds discharged. The rule was made absolute, and the respondents were ordered to pay the petitioners' costs.