2015 (1) TMI 709 - AT - Customs

Refund claim - Encashment of Bank guarantee - Bar of limitation - Held that - appellants could have claimed the refund of encashed Bank Guarantee only after the completion of export obligations and after cancellation of Bank Guarantee. The cancellation happened on 26-5-2010 and the refund claim was filed on 19-7-2010 i.e. within a period of one year. The Revenue s view is that inasmuch as the Bank Guarantee was encashed in March 2006 the refund claim filed on 19-7-2010 is barred by limitation and cannot be sanctioned. On the other hand the contention of the appellants is that they could file the refund claim of encashed Bank Guarantee only after completion of export and after cancellation of the Bank Guarantee which they did immediately. - Refund sanctioned.

Summary

Issues:
1. Refund claim of encashed Bank Guarantee barred by limitation.

Analysis:
The appellants failed to meet their export obligations, leading to the encashment of the Bank Guarantee by the Revenue. However, they later fulfilled the obligations, resulting in the cancellation of the Bank Guarantee. Subsequently, they filed a refund claim for the encashed amount. The Revenue contended that the refund claim filed within a year of the cancellation was time-barred as the encashment occurred in 2006. The appellants argued that the refund claim could only be made after fulfilling export obligations and canceling the Bank Guarantee, which they promptly did.

The Tribunal referred to a previous case where it was held that encashment of a Bank Guarantee cannot be equated to duty payment, thus not subject to limitation. In the present case, the encashment was due to non-fulfillment of export obligations, and the refund was claimed upon producing the Export Obligation Discharge Certificate (EODC) from the Directorate General of Foreign Trade (DGFT).

The Departmental Representative cited a Supreme Court decision regarding refund claims and limitation under the law. However, the Tribunal distinguished the present case as involving a refund arising from the encashment of a Bank Guarantee, not duty payment. The Tribunal emphasized that the refund claim could only be made after fulfilling export obligations and the cancellation of the Bank Guarantee, shifting the relevant date for the claim.

Ultimately, the Tribunal set aside the Commissioner (Appeals)'s order, allowing the appeal and restoring the original adjudicating authority's decision to sanction the refund claim.