2024 (4) TMI 575 - AT - Customs

Refund of Excess Customs Duty paid - principles of unjust enrichment - refund claimed transferred to consumer welfare fund alleging that the amount has been passed on to others and not borne by the appellant - HELD THAT - The entire amount of duty and interest has been paid by the appellant after receiving certain amounts from M/s. Microsoft Corporation to meet the requirement of payment of duty. During the settlement proceedings the Hon ble Settlement Commission recorded the amount required to be paid and the amount deposited and also held that the excess amount if any be refunded to the assessee after adjusting the penalty amount. The authorities below transferred the refund amount to the Consumer Welfare Fund observing that the appellant has not borne the burden of the duty themselves but passed on to Microsoft Corporation; also the amount has not been shown as receivable soon after payment of duty. Reading the agreement in its entirety it is found that after the proceedings were initiated against the appellant they have received certain amounts from the overseas suppliers of M/s. Microsoft Corporation to meet the requirement of payment of duty and interest who advanced certain amounts with a condition that the excess amount if any after adjusting the duty and interest be refunded to M/s. Microsoft Corporation. The appellant thus cannot retain the excess amount with them in accordance with the said agreement. Consequently the refund amount cannot be retained by the Appellant but has to be repaid to M/s. Microsoft as per the said Agreement. Also it is found that the appellant could not reflect the excess amount refundable in their books of accounts before the order of the Settlement Commission but could reflect only after the Settlement Commission has recorded a finding to this effect quantifying the settlement amount. There are no discrepancy of not showing the excess amount as receivables before the Settlement Commission s order in their books of accounts which has been successively every year thereafter has been shown including for the financial year ending 31.3.2023. The impugned order is set aside - appeal allowed.

Summary

Issues:
The judgment involves the issue of refund claim filed by the appellant, duty payment on imported software, excess amount refund, unjust enrichment, and interpretation of the Grant Agreement between the appellant and M/s. Microsoft Corporation.

Refund Claim and Duty Payment:
The appellant filed a refund claim after a Settlement Commission order, seeking refund of excess duty paid. The duty and interest were settled by the Settlement Commission, with a penalty imposed. The appellant claimed refund of the excess amount, which was contested by the Revenue. The Revenue argued that duty burden was borne by M/s. Microsoft Corporation, not the appellant.

Grant Agreement Interpretation:
The appellant argued that the Grant Agreement with M/s. Microsoft Corporation was akin to a loan arrangement for duty payment, with an obligation to refund excess amounts to M/s. Microsoft. They contended that the amount was shown as receivable in their books of accounts, indicating the intention to repay the excess amount.

Unjust Enrichment and Legal Precedents:
The appellant cited legal precedents to support their claim, emphasizing that the amount was deposited under protest and the principles of unjust enrichment should not apply. They highlighted discrepancies in the Revenue's argument regarding duty burden and the appellant's obligation to refund the excess amount.

Settlement Commission's Order and Refund Obligation:
The Settlement Commission's order specified the refund of excess amounts due to the appellant, subject to penalty adjustments. The appellant's obligation to repay the excess amount to M/s. Microsoft was based on the terms of the Grant Agreement, which required repayment within a specified period.

Judgment and Conclusion:
After analyzing the Settlement Commission's order and the Grant Agreement, the Tribunal found that the duty and interest payments were made by the appellant, with the obligation to refund excess amounts to M/s. Microsoft. The Tribunal ruled in favor of the appellant, stating that the refund amount should be repaid to M/s. Microsoft as per the agreement terms. The Tribunal noted that the appellant had consistently shown the excess amount as receivable in their accounts, indicating no unjust enrichment. Consequently, the impugned order was set aside, and the appeal was allowed with consequential relief.