2017 (6) TMI 616 - HC - Customs

Refund claim - time limitation - Whether the CESTAT is right in holding that the importer is entitled to get refund claim, even though the importer has made the refund claim beyond the limitation period as prescribed u/s 27 of CA, 1962? Whether the CESTAT is right in holding that periodicity of 6 months as envisaged u/s 27 of CA, 1962 is not applicable to the refund amount realised by the Revenue by enforcing Bank Guarantee as this does not represent any duty u/s 27 of the CA? Held that - respondent no.2 had been issued three licenses between June, 1995 and October, 1995, for importing capital goods at a concessional rate of duty. This facility could be made available to respondent no.2, by virtue of the provisions of Notification No.110/1995. Admittedly, under the EPCG Scheme, respondent No.2, had a leeway of five years for completing the export obligation. Respondent fulfilled the export obligation, well within the time frame, provided under the EPCG Scheme, but also furnished all documents in that behalf - The delay with regard to the submissions of EODC, in our view, could not be attributed to respondent no.2, as requisite steps had been taken by it, immediately after, fulfilment of export obligation by furnishing other relevant documents, which would have demonstrated that the export obligation in point of fact stood fulfilled. As to the nature of the amount deposited in whichever form. If, the amount deposited, is, towards security, surely, once the Assessee succeeds, he is entitled to seek restitution. Restitution, in such like circumstances, is not covered by Section 27 of the Act. Appeal dismissed - decided against Revenue.

Summary

Issues Involved:
1. Whether the CESTAT is right in holding that the importer is entitled to get a refund claim, even though the importer has made the refund claim beyond the limitation period as prescribed under Sec.27 of the Customs Act, 1962.
2. Whether the CESTAT is right in holding that the periodicity of 6 months as envisaged under Section 27 of the Customs Act, 1962 is not applicable to the refund amount realized by the Revenue by enforcing the Bank Guarantee as this does not represent any duty under Section 27 of the Customs Act.

Issue-wise Detailed Analysis:

1. Entitlement to Refund Claim Beyond Limitation Period:
The appeals were preferred by the Revenue against the common judgment and order dated 05.08.2004 passed by the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT). The Tribunal held that the importer was entitled to a refund claim even though it was made beyond the limitation period prescribed under Section 27 of the Customs Act, 1962. The Tribunal concluded that the amount realized by the Revenue through the encashment of the Bank Guarantee was not a duty, and thus, the provisions of Section 27 of the Act were not applicable. The Tribunal relied on the Supreme Court's judgment in Oswal Agro Mills Limited Vs. Assistant Collector of Central Excise, Ludhiana, 1994 (70) E.L.T. 48 (S.C.), which stated that the furnishing of a bank guarantee is not equivalent to the payment of the amount of excise duty.

2. Applicability of the 6-Month Periodicity under Section 27 of the Customs Act:
The Tribunal held that the 6-month limitation period under Section 27 of the Customs Act, 1962, does not apply to the refund amount realized by the Revenue by enforcing the Bank Guarantee. The Tribunal's reasoning was that the encashment of the Bank Guarantee was not towards the duty amount but was a form of security. The Tribunal's decision was challenged by the Revenue, arguing that the Bank Guarantee was encashed towards the duty amount as the requisite documents were not furnished at the relevant time, which would have entitled the importer to claim exemption under Notification No.110/95.

Detailed Analysis:
The Court noted that the importer's export obligation was completed within the stipulated period of five years, and the necessary documents were submitted by March 1999. However, the Export Obligation Discharge Certificate (EODC) was not submitted at that time. Despite this, the Bank Guarantees were invoked and encashed by the appellant on 04.08.2001. The EODCs were later issued and submitted to the appellant, and refund claims were lodged by the importer.

The Court found that the delay in submitting the EODC could not be attributed to the importer as they had taken the necessary steps immediately after fulfilling the export obligation. The Court also noted that the appellant had discharged the bond once the documents evidencing export were submitted. The Court agreed with the Tribunal's view that the encashment of the Bank Guarantee was not towards the payment of duty but was a form of security. The EODCs, once furnished, would relate back to the date of import, demonstrating that the importer had complied with the conditions of Notification No.110/95 and was entitled to the concessional rate of duty.

The Court upheld the Tribunal's reliance on the Supreme Court's judgment in Oswal Agro Mills Limited, which stated that a bank guarantee furnished as security is not equivalent to the payment of duty, and thus, Section 27 of the Customs Act is not applicable. The Court also referred to similar views held in other judgments by Division Benches and a Single Judge of the Court.

Conclusion:
The Court concluded that the nature of the amount deposited, whether as security or duty, is crucial in determining the applicability of Section 27 of the Customs Act. Since the amount in question was deposited as security, the importer was entitled to seek restitution, and Section 27 did not apply. The two questions of law were answered in favor of the importer, and the appeals were dismissed with costs following the result.