2024 (6) TMI 352 - AT - Customs

Refund of cash security deposit u/s 27 of Customs Act, 1962 - rejection on the ground of time limitation provided u/s 27 of the Customs Act, 1962 - HELD THAT - The impugned order has been passed without taking the note of fact that the amount claimed as refund was not the amount of duty or interest deposited by the appellant. The said amount was deposited as security deposit as directed by the department for assessing the goods provisionally when the matter was under consideration of Special Valuation Branch (SVB). Finally SVB accepted the Value as declared by the appellant and hence the security deposit became refundable to the appellant. The cash security made by the appellant was in lieu of any duty that would have become due on account of finalization of assessment in terms of the rule 18 (2). The rule clearly provides that in case if on finalization of assessment the duty determined falls short of the duty paid and the amount deposited, the appellant will be entitled to refund of the amount which is paid by him in excess of the amount of duty finally assessed. Section 18 (4) clearly provides that the amount refundable in terms of Section 18 (2) should be refunded to the appellant within three months of finalization of assessment. The Section 18 (5) is independent provision and not sub servant to Section 27 of the Customs Act, 1962. There are no merits in the impugned order, as it has applied the limitation provided under Section 27 of the Customs Act, 1962 for rejecting the refund of cash security made by the appellant for provisional assessment and which became refundable subsequent to finalization of assessment. The refund should have been made as per the provisions of Section 18 (4) of the Customs Act, 1962. Appeal allowed.

Summary

Issues Involved:
1. Refund claim of security deposit u/s 27 of Customs Act, 1962.
2. Applicability of limitation period u/s 27 of Customs Act, 1962.
3. Nature of deposit: Security deposit vs. Duty paid provisionally.
4. Automatic refund of security deposit post finalization of assessment.

Summary:

1. Refund Claim of Security Deposit u/s 27 of Customs Act, 1962:
The appellant filed a refund claim amounting to Rs. 57,40,416/- on 01.05.2018 u/s 27 of the Customs Act, 1962, arguing that the amount deposited as Extra Duty Deposit (EDD) was a security deposit and not duty paid provisionally. The original authority rejected the claim on 15.06.2018, and the Commissioner (Appeals) upheld this decision on 05.11.2019.

2. Applicability of Limitation Period u/s 27 of Customs Act, 1962:
The Commissioner (Appeals) held that the refund claim was time-barred as it was filed after the one-year limitation period prescribed u/s 27 of the Customs Act, 1962. The appellant contended that the limitation period should not apply to security deposits, but the Commissioner (Appeals) relied on precedents such as Madras Rubber Factory Ltd vs. Union of India and Collector of C.E. Chandigarh vs. Doaba Co-operative Sugar Mill to uphold the limitation.

3. Nature of Deposit: Security Deposit vs. Duty Paid Provisionally:
The Tribunal noted that the amount in question was a security deposit made for provisional assessment and not duty paid provisionally. The SVB had accepted the declared value, making the security deposit refundable. The Tribunal emphasized that the refund of such security deposits should not be subjected to the limitation period u/s 27.

4. Automatic Refund of Security Deposit Post Finalization of Assessment:
The Tribunal highlighted that u/s 18(4) of the Customs Act, 1962, the refund of security deposits should be automatic and processed within three months of the final assessment. The Tribunal cited the Supreme Court's decision in Mafatlal Industries, which clarified that recoveries or refunds consequent to provisional assessments are not governed by Sections 11A or 11B of the Central Excise Act, 1944, and by analogy, the same principle applies to the Customs Act.

Conclusion:
The Tribunal found no merit in the impugned order applying the limitation period u/s 27 for rejecting the refund of the security deposit. The appeal was allowed with consequent relief, directing that the refund should be processed as per the provisions of Section 18(4) of the Customs Act, 1962.