2016 (10) TMI 376 - AT - Customs

Refund claim - excess custom duty paid - revenue deposit to the Government of India - provisional assessment - classification of imported machinery - entry 8207.19 or entry 8431.43 - doctrine of unjust enrichment - whether the refund be allowed keeping in mind the principles of unjust enrichment w.e.f. 13/7/2006? - Held that - provisional assessments are governed by the provisions of Section 18 of the Customs Act, 1962 and during the relevant period, the section specifically mandated for recovery of short paid and refund of excess paid on finalization of the provisionally assessed bill of entry. The said section did not have a clause of unjust enrichment has to be satisfied before the refund is sanctioned. On 13.7.2006, an amendment was carried out, by which it mandated in Section 18(3) & (4) that any refund that arises due to finalization of provisional assessment has to also satisfy the doctrine of unjust enrichment. The bar of unjust enrichment in the case of refund arising out of finalization of provisional assessment will apply only from 13.7.2006. Also a certificate issued by a Chartered Accountant in July 2005, who, after verifying the books of accounts and records and other relevant records of the appellant, had certified that the amount for which refund has been claimed is not charged to profit and loss account as an expense, the said amount is shown as a revenue deposit and was not recovered from the Municipal Corporation of Greater Mumbai or any other customer. Refund to be allowed - appeal allowed - decided in favor of assessee.

Summary

Issues involved:
Refund of revenue deposit on provisional assessment; Doctrine of unjust enrichment in refund cases; Interpretation of Section 18 of the Customs Act, 1962.

Analysis:
1. Refund of revenue deposit on provisional assessment: The case involved a dispute over the classification of imported goods by the appellant and the subsequent refund of a revenue deposit paid. The adjudicating authority initially held in favor of the appellant, directing the refund. However, the first appellate authority overturned this decision, citing the doctrine of unjust enrichment.

2. Doctrine of unjust enrichment in refund cases: The first appellate authority relied on the judgment of the Hon’ble High Court of Bombay in a previous case to argue that the refund, even under Section 18(2), must pass the test of unjust enrichment. The appellant argued that the law prior to 13.7.2006 did not include unjust enrichment in provisional assessments, citing judgments from various High Courts to support their claim.

3. Interpretation of Section 18 of the Customs Act, 1962: The Member (Judicial) analyzed the provisions of Section 18 during the relevant period and noted that the section did not mandate the doctrine of unjust enrichment for refunds arising from finalization of provisional assessments. The Member highlighted the subsequent amendment in 2006 that introduced unjust enrichment requirements, emphasizing that it was not necessary if the Revenue’s stance on unjust enrichment was absolute.

In conclusion, the Member found merit in the appellant’s arguments, especially regarding the absence of unjust enrichment requirements in the relevant period and the positive evidence provided through a certificate from a Chartered Accountant. The Member set aside the impugned order, allowing the appeal with consequential relief. The judgment clarified the application of unjust enrichment in refund cases, based on the interpretation of relevant legal provisions and judicial precedents.