2019 (12) TMI 860 - HC - Customs

Refund claim - unjust enrichment - inalization of provisional assessment - section 18(5) of CA - Whether the Hon'ble Tribunal erred in following the judgment of the Hon'ble Court in Scientific Instruments (Supra) 2014 (12) TMI 530 - MADRAS HIGH COURT , which is per incuriam the judgments of the Hon'ble Supreme Court in Mafatlal (Supra) and Allied Photographics (Supra)? HELD THAT - Clause (a) of sub-section (5) makes it clear that, the duty and interest if any paid by the importer can be refunded, provided if he had not passed on the incidence of such duty and interest, if any paid on such duty, to any other person. Therefore it became mandatory that, by virtue of sub-section (5) of Section 18, unless the importer is able to prove that, he has not passed on the incidence of such duty and interest, if any paid, to any other person, he would not be entitled to claim refund. In this context, it is the case of the importer / appellant as vehemently contended by the learned counsel appearing for the importer / appellant that, the said sub-section (5) of Section 18, since has application only from 13.07.2006 and as per the various decision of the High Courts as has been relied upon by him, it would not have any retrospective effect, the said provision shall not be made applicable to the case of the importer / appellant herein, since admittedly all the three applications of the importer / appellant seeking refund were made well prior to 13.07.2006. From the reading of the aforesaid Section 18(2) and (5) of the Act as well as the decision of the Scientific Instruments case ( supra ) of a Coordinate Bench of this Court, we are of the considered view that, the importer has to necessarily satisfy the unjust enrichment test before the original authority not withstanding the fact that, he has made the claim for refund in all the three cases before 13.07.2006 - Since the final assessment was not over and before which based on the provisional assessment under Section 18(1) since duty had been paid by the importer, of course under protest and thereafter consequent upon the eligibility of the importer after the Judgment of the Hon'ble Apex Court in their own case in Tata Teleservices Ltd., v. Commissioner of Customs reported in 2006 (194) ELT 11 (SC) ( cited supra ), the importer made those applications. Merely because those applications for claim of refund were made prior to 13.07.2006, it cannot be said that, the import of sub-section (5) of Section 18 has become redundant especially in the context of unjust enrichment theory - After the final assessment if the importer is otherwise eligible to get refund under any exemption given by way of notification or otherwise, the importer can make a claim for refund, at that time, certainly the Revenue would be entitled to go into the correctness of such claim by putting the test of unjust enrichment on the importer and in such case, it is the duty of the importer to establish that, he had not passed on the incidence of such duty to any other person. Therefore it is the factual matrix, that too, to the subjective satisfaction of the assessing or adjudicating authority who must come to a conclusion that, there has been no unjust enrichment on the part of the importer and then only he must allow the refund claim of the importer even though the importer already entitled to make such a claim statutorily. The Substantial Questions of Law framed in these appeals are against the importer / appellant and in favour of the Revenue - appeal dismissed - decided against appellant.

Issues Involved:
1. Whether the Tribunal erred in following the judgment in Scientific Instruments, which is per incuriam the judgments of the Supreme Court in Mafatlal and Allied Photographics.
2. Applicability of Section 18(5) of the Customs Act post-amendment to refund claims made prior to 13.07.2006.
3. Legitimacy of remanding the issue for examining unjust enrichment in light of Supreme Court and High Court judgments.

Detailed Analysis:

Issue 1: Tribunal’s Reliance on Scientific Instruments Judgment
The primary contention was whether the Tribunal erred in following the judgment in Scientific Instruments, which allegedly overlooked the Supreme Court judgments in Mafatlal and Allied Photographics. The Tribunal had relied on the decision in Scientific Instruments, which held that the test of unjust enrichment applies to provisional assessments followed by final assessments, even if the refund claim was made prior to the insertion of Section 18(5) of the Customs Act. The High Court upheld this reliance, noting that the Tribunal followed judicial discipline by adhering to the precedent set by the High Court in Scientific Instruments.

Issue 2: Applicability of Section 18(5) Post-Amendment
The appellant argued that Section 18(5) of the Customs Act, which mandates the examination of unjust enrichment, should not apply to refund claims made before its insertion on 13.07.2006. The Court examined the provision and concluded that the principle of unjust enrichment is inherent in the refund process, irrespective of the specific date of the amendment. The Court referred to the Supreme Court’s decision in Mafatlal, which emphasized that refund claims are subject to proof of not passing on the duty burden to others. Thus, the Court held that the principle of unjust enrichment applies to all refund claims, even those made before the amendment.

Issue 3: Legitimacy of Remanding for Unjust Enrichment Examination
The appellant contended that the Commissioner (Appeals) should not have remanded the matter to the original authority to examine unjust enrichment, as this was only applicable post-13.07.2006. The Court disagreed, stating that the final assessment of duty inherently involves examining whether the duty burden was passed on. The Court cited Section 18(2) of the Customs Act, which requires final assessment before a refund is considered, and noted that unjust enrichment must be evaluated to ensure the importer has not passed on the duty burden. The Court supported the remand, affirming that the original authority must verify unjust enrichment before granting refunds.

Conclusion:
The High Court upheld the Tribunal’s decision, confirming that the principle of unjust enrichment applies to all refund claims, regardless of when they were made. The Court emphasized that final assessments must include an examination of unjust enrichment to prevent undue benefits. The appeals were dismissed, and the Tribunal’s order was sustained, affirming the remand for examining unjust enrichment. The substantial questions of law were answered against the appellant and in favor of the Revenue.

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