2015 (11) TMI 1232 - HC - Customs

Enforcement of Bank Guarantee - Denial of refund claim - Bar of limitation - Held that - Petitioner was issued with the Export Obligation Discharge Certificate (EODC) against EPCG Licence by the office of the Joint Director General of Foreign Trade, Ministry of Commerce, Government of India, on 26.05.2003 - petitioner Company had fulfilled their export obligation and thereafter, they have also issued with Export Obligation Discharge Certificate on 26.05.2003, wherein a sum of USD 8,14,639/- has been fulfilled by the petitioner towards export obligation, which is over and above the sum stipulated as per the licence. Therefore, when the Export Obligation Discharge Certificate has been rightly issued by the DGFT, the petitioner, vide his letter dated 28.05.2003, requested the Commissioner of Customs, chennai, to release the original bank guarantee, however, the Deputy Commissioner of Customs has wrongly rejected, vide his order dated 20.08.2007, stating that the refund application has been filed beyond the limitation period of six months as stipulated in Section 27 of the Customs Act. Aggrieved by the same, when appeal was preferred, the appellate authority vide order dated 04.11.2009, confirmed the order passed by the Deputy Commissioner of Customs, by repeating the same reasons. Therefore, such reasons assigned by the original authority and appellate authority in their orders, in my view, are totally running contrary to the ratio laid down by Hon ble Apex Court 1994 (2) TMI 57 - SUPREME COURT OF INDIA and this Court. - it is crystal clear that the the bank guarantee cannot be regarded as equivalent to payment of duty and it is only furnished to safeguard the interest of the revenue in case of non fulfilment of export obligation. - Impugned order is set aside - Decided in favour of assessee.

Summary

Issues Involved:
1. Applicability of Section 27 of the Customs Act to enforced bank guarantees.
2. Whether furnishing a bank guarantee can be regarded as payment of duty.
3. Entitlement to refund of the enforced bank guarantee amount.
4. Claim for interest on the belated refund of the bank guarantee.

Issue-wise Detailed Analysis:

1. Applicability of Section 27 of the Customs Act to enforced bank guarantees:
The petitioner argued that Section 27 of the Customs Act, which stipulates a six-month limitation period for refund claims, is not applicable to enforced bank guarantees. The petitioner contended that the sum of Rs. 4,07,245/- was taken by the department under the enforcement of a bank guarantee, which was given as security, not as a payment of duty. The court found that the Deputy Commissioner of Customs wrongly rejected the refund application based on the six-month limitation period, as the enforcement of a bank guarantee does not equate to the payment of duty.

2. Whether furnishing a bank guarantee can be regarded as payment of duty:
The petitioner relied on the judgment of the Apex Court in Oswal Agro Mills Limited v. Assistant Collector of Central Excise, which held that furnishing a bank guarantee cannot be regarded as payment of duty. The court agreed with this precedent, stating that a bank guarantee is a security measure and not an actual payment of duty. Therefore, the enforcement of the bank guarantee does not attract the provisions of Section 27 of the Customs Act.

3. Entitlement to refund of the enforced bank guarantee amount:
The petitioner fulfilled its export obligations and obtained the Export Obligation Discharge Certificate (EODC) from the DGFT, which confirmed that the petitioner had met and exceeded the stipulated export obligation. Despite this, the Customs department initially refused to refund the enforced bank guarantee amount. The court found that since the petitioner had fulfilled its export obligations, the enforced bank guarantee amount should be refunded. The court directed the respondent to refund the amount of Rs. 4,07,245/- within one week from the date of receipt of the order.

4. Claim for interest on the belated refund of the bank guarantee:
The petitioner sought interest on the delayed refund of the bank guarantee amount. However, the respondent argued, citing the judgment in Commissioner of Customs and another v. M/s. Areva T&D India Limited, that the petitioner is not entitled to claim interest on the delayed refund. The court upheld this argument, stating that the petitioner is not entitled to interest on the refunded amount.

Conclusion:
The court allowed the writ petition to the extent of directing the refund of Rs. 4,07,245/- within one week but denied the claim for interest on the belated refund. The court emphasized that the enforcement of a bank guarantee does not equate to the payment of duty and, therefore, the six-month limitation period under Section 27 of the Customs Act does not apply. The judgment underscores the distinction between security measures like bank guarantees and actual payments of duty.