2008 (1) TMI 160 - HC - Customs

Whether Tribunal is right in holding that time limit is not applicable to the refund of bank guarantee - respondent has fulfilled the export obligation but could not produce the discharge certificate from the licensing authority bank guarantee discharged by license authority held that bank guarantee furnished in order to secure the due performance of the export obligation cannot be regarded as payment of duty refund allowable revenue appeal dismissed

Summary

Issues:
1. Refund of bank guarantee for the difference in duty rates beyond the time limit specified in the Customs Act, 1962.
2. Entitlement for refund when the export obligation is not discharged within the stipulated time.

Issue 1: Refund of Bank Guarantee
The appeal was filed by the Commissioner of Customs regarding the refund of a bank guarantee for the difference in duty rates between the actual rate and concessional rate. The respondent imported capital goods under the EPCG scheme and cleared them without payment of duty, fulfilling the export obligation but failing to produce a discharge certificate in time. The bank guarantee was invoked by the appellant before the certificate was produced, and the refund claim was rejected as time-barred under section 27(1)(b) of the Customs Act. The Commissioner (Appeals) allowed the refund, which was confirmed by CESTAT. The High Court held that the bank guarantee was not payment of duty, and as the importer fulfilled the export obligation, the claim was not time-barred under section 27 of the Act. Citing precedents, the court emphasized that the bank guarantee is not equivalent to payment of duty, and therefore, section 27 on duty refund does not apply in this scenario.

Issue 2: Export Obligation Discharge
Regarding the second issue of entitlement for refund when the export obligation is not discharged within the stipulated time, the court found that the respondent did fulfill the export obligation by submitting a discharge certificate from the licensing authority. The Deputy Commissioner, Commissioner of Income Tax (Appeals), and EPCG all confirmed the fulfillment of the export obligation. The Tribunal's order also acknowledged the fulfillment of the export obligation by the respondent, although the discharge certificate was not produced in time. Therefore, the court concluded that the second question of law did not arise for consideration as the export obligation was indeed fulfilled. No substantial question of law was found, leading to the dismissal of the appeal and the connected miscellaneous petition without costs.

This judgment clarifies the distinction between bank guarantees and duty payments under the Customs Act, emphasizing that the invocation of section 27 for duty refund does not apply to bank guarantees securing export obligations. It also underscores the importance of fulfilling export obligations, even if administrative delays occur in producing necessary certificates. The decision aligns with previous rulings and provides a comprehensive analysis of the legal issues involved in the appeal.