2022 (9) TMI 1304 - HC - Customs

Refund alongwith interest claim - classification of coils and spares and accessories - to be classified under Entry 8544.11 or under Entry 6815.99 under the Schedule to the Customs Tariff Act, 1975 - HELD THAT - The computation of duty also indicates the duty paid in respect of 4 Bills of Entries, 2 for coils and 2 for accessories. Thus, there is no doubt that claim for refund was made in respect of duty paid for both coils and accessories. It thus follows that the orders-in-original and first appeal, and the order of the CESTAT relate to the refund application as a whole and in respect of all 4 bills of entries. Even on a practical and pragmatic appreciation of the matter, it does not stand to reason that the coils would be classifiable under Entry 8503 and accessories for the coils be classified under a different heading altogether. Clearly, there is an error in the references to tariff heading in the bills of entries and the revenue must not be seen to take advantage of this error in classification. Once the CESTAT has categorically held that coils would fall under tariff heading 8503, it follows on all counts that accessories to the coil should also be treated under the same head, also eligible for duty refund. The conclusion of R2 and the submissions of the revenue to the effect that the refund must be restricted only to the duty paid on account of coils, cannot be disagreed - impugned order to the extent to which it rejects the refund in respect of accessories is quashed. Interest - HELD THAT - Interest is payable from 3 months from date of receipt of the refund application till date of payment. In this case, the date of refund application is 27.08.1994 and in light of the order passed above holding the refund payable, interest would be applicable on the amount to be refunded on accessories in terms of Section 27A, from 3 months from date of refund application till date of payment. Petition allowed.

Summary

Issues Involved:
1. Classification of imported goods under the Customs Tariff Act.
2. Eligibility for refund of customs duty paid.
3. Applicability of interest on delayed refunds under Section 27A of the Customs Act, 1962.

Detailed Analysis:

1. Classification of Imported Goods:
The petitioner, a Government of Karnataka undertaking, imported epoxy coils and accessories for their Hydro Electric Generation power plant. Initially, these items were classified under Entry 8544.11 (coils) and Entry 6815.99 (accessories) of the Customs Tariff Act, 1975. The petitioner later contended that the correct classification should be under Entry 8503, which pertains to parts suitable for use solely or principally with machines of headings 85.01 or 85.02. This reclassification was supported by the supplier's certification and detailed review of the customs tariff.

2. Eligibility for Refund of Customs Duty Paid:
The petitioner filed a refund application on 27.08.1994, claiming that the duty had been paid on an incorrect classification. The refund application detailed the excess duty paid and requested reassessment under the correct tariff heading. The Assistant Commissioner of Customs (Refunds) initially rejected the refund application, a decision upheld by the Commissioner (Appeals). However, the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) reversed this decision, holding that the goods were indeed classifiable under 8503, thus entitling the petitioner to a refund. The CESTAT's order was based on the specific use of the imported goods with the hydroelectric generators, supported by documentary evidence.

3. Applicability of Interest on Delayed Refunds:
The impugned order restricted the refund to the duty paid on coils alone, excluding accessories. The High Court found this interpretation flawed, noting that the refund application and CESTAT's order pertained to both coils and accessories. The court emphasized that the accessories, being integral to the coils, should also be classified under Entry 8503. Consequently, the petitioner was entitled to a full refund, including for the accessories. Additionally, the court addressed the issue of interest on delayed refunds under Section 27A of the Customs Act, 1962. It clarified that interest is payable from three months after the date of the refund application (27.08.1994) until the date of payment, applicable to both coils and accessories.

Conclusion:
The High Court quashed the impugned order to the extent it denied the refund for accessories, directing the refund to be paid with applicable interest within six weeks. The court underscored the need for a holistic view of the refund application and CESTAT's order, rejecting the revenue's narrow interpretation. The ruling emphasized the correct classification of goods and the statutory entitlement to interest on delayed refunds, ensuring the petitioner's legitimate claims were honored.