2015 (10) TMI 762 - HC - Customs

Claim for Refund of Penalty Mis-declaration of goods Penalty imposed - Commissioner (Appeals) annulled the adjudication order passed by Assistant Commissioner of Customs As such, refund claim filed by the Petitioners with KASEZ, Gandhidham refused to refund the claim stating that there are no provisions in SEZ Act for refund of excess customs duty paid by SEZ units Petitioner contended that Respondents have no authority to retain the amount paid towards penalty under the adjudication order Respondent contested that Appellate Commissioner has not decided the case on merits and remanded the case back for de novo adjudication by the proper authority and the claims for refund filed by the petitioners are thoroughly misconceived. Held That - Once the orders-in-original have been set aside, the Respondent has no authority to retain the amounts deposited by the petitioners towards duty after being annulled by the orders passed by the Appellate Commissioner Contentions of the Respondent are premature, cannot be countenanced - Petitions succeed and allowed Decided in favour of the Petitioner.

Summary

Issues Involved:
1. Jurisdiction of the Assistant Commissioner of Customs regarding SEZ units.
2. Legality of retaining penalty amounts after annulment of the adjudication order.
3. Prematurity of refund claims following remand for de novo adjudication.

Issue-wise Detailed Analysis:

Jurisdiction of the Assistant Commissioner of Customs regarding SEZ units:
The petitioner firm, operating a manufacturing unit at KASEZ, was involved in importing worn and used clothing as raw materials. An order-in-original dated 13.04.2012 was passed against the petitioner firm by the Assistant Commissioner of Customs, classifying the goods under CTH 63090000 and imposing penalties. The Commissioner (Appeals) later annulled this order on 10.05.2013, citing lack of jurisdiction of the Assistant Commissioner over KASEZ units. The Commissioner (Appeals) directed that the case be adjudicated by the proper authority following principles of natural justice. Consequently, no further proceedings were taken against the petitioner firm, and no adjudication order was issued by any competent authority.

Legality of retaining penalty amounts after annulment of the adjudication order:
Following the annulment of the adjudication order, the petitioner filed a refund application for Rs. 40,000/- paid as penalty. However, the refund claim was returned by the Assistant Commissioner of Customs (Refund) at Kandla, stating that it should be filed with KASEZ, Gandhidham. Upon submission to the said authority, the refund was denied on the basis that there was no provision in the SEZ Act for refund of excess customs duty paid by SEZ units. The petitioner then approached the court, which held that the Commissionerate of Customs retained the authority under section 27 of the Customs Act, 1962 to entertain refund claims. The court observed that the amount deposited by the petitioner as penalty could not be retained by the respondents once the adjudication order was annulled. The court referenced multiple High Court decisions, including those from Bombay, Andhra Pradesh, Delhi, Allahabad, and Punjab & Haryana, which supported the view that amounts paid as penalties must be refunded if the adjudication order is set aside.

Prematurity of refund claims following remand for de novo adjudication:
The respondents argued that the refund claims were premature as the cases were remanded for de novo adjudication and the petitioner's liability had not been adjudicated on merits. The court rejected this argument, stating that once the orders-in-original were annulled, the amounts paid by the petitioners could not be retained. The court emphasized that the adjudication was at the stage of the original show cause notice, and no adjudication had been made regarding the duty liability or penalties. Thus, the respondents had no authority to retain the amounts paid by the petitioners.

Conclusion:
The court quashed the impugned communications dated 09.02.2015 from the second respondent, which returned the refund claims as premature. The petitioners were directed to resubmit their refund claims within four weeks, and such claims would relate back to the first presentation before the Customs authority. The respondent authorities were instructed to decide the refund claims in accordance with law within four weeks of submission. Rule was made absolute with no order as to costs.