2020 (4) TMI 9 - HC - Customs

Claim of Refund and Interest on Refund - Unjust enrichment - Though the refund was sanctioned, the same was credited to the Consumer Welfare Fund on the ground of unjust enrichment. The sole basis appears to have been that the amount claimed as refund was not charged to the profit and loss account but retained in 'receivables' account. - HELD THAT - The CESTAT (while remanding the case back) has, in conclusion, noted the submission of the petitioner that the entire sales of Palmolein oil had been completed in August 2001 itself, and the differential duty remitted, under protest, in September, 2001. It is in this context that the CESTAT states that documents in support of the aforesaid submission be examined by the Authority to convince himself that the incidence of duty has not been passed on to the consumer. Regrettably, the Assessing Authority has completely lost sight of this exercise and has proceeded merely on the basis of accounting entries, the methodology of accounting followed by the petitioner and as to whether the duty had been reflected in the 'receivables' or 'profit and loss' accounts. Admittedly, the sales had been completed in August 2001 whereas the differential duty was remitted only in September 2001, it appears clear to me as seen from the records of the Assessing Officer and his observations in the impugned order, that the incidence of duty has not been passed on in this case. There is thus no necessity for remand as this exercise and the result thereof is quite apparent from the existing records and the observations of the officer himself - decided in favor of petitioner. Interest on the refund claim - Section 27A of Customs Act - case of Revenue is that the provisions of Section 27A require interest to be paid on duty that has been ordered to be refunded under Section 27(2) but not refunded within three(3) months from date of receipt of application under Section 27(1) of the Act - HELD THAT - The refund claim in this case was filed on 03.02.2016, the Application was returned as defective and the application re-presented on 14.03.2016. These dates are not in dispute. Thus, in the light of the discussion as above and the clear stipulation in Section 27B, interest at the rate of 6% shall be paid by the respondents on an amount of ₹ 1,09,11,275/- computed from 14.06.2016 till date of repayment within a period of four (4) weeks from date of receipt of this order. Petition allowed.

Summary

Issues Involved:
1. Applicability of the revised rate of duty on imported goods.
2. Refund of differential duty and unjust enrichment.
3. Interest on the refund claim.

Detailed Analysis:

1. Applicability of the Revised Rate of Duty on Imported Goods:
The petitioner, engaged in the manufacture and sale of bakery fats, imported 2800.662 metric tonnes of RBD Palmolein (edible grade) in July 2001. Two bills of entry were filed on 03.08.2001 and 04.08.2001 for clearance of 2471.788 MT for home consumption. The Customs Department re-assessed the ex-bond bills of entry based on a new rate of duty prescribed on 03.08.2001, published in the Gazette on 06.08.2001. The petitioner contended that the original rate should apply as the revision would only be effective from the publication date, 06.08.2001. Despite this, the petitioner paid the differential duty under protest in September 2001.

2. Refund of Differential Duty and Unjust Enrichment:
The petitioner challenged the Department's demand for differential duty, which was decided in their favor on 04.06.2015. They claimed a refund on 03.02.2016, which was sanctioned but credited to the Consumer Welfare Fund due to unjust enrichment concerns. The petitioner’s appeal to the Commissioner (Appeals) was rejected, but a further appeal to the CESTAT resulted in a remand to the Assessing Authority to verify if the incidence of duty was passed on to the consumer. The CESTAT noted that the petitioner had completed the sale of goods before paying the differential duty and directed the original authority to examine supporting documents. However, the Assessing Officer, in the impugned order dated 09.02.2018, failed to properly address this issue, focusing instead on accounting entries.

3. Interest on the Refund Claim:
The petitioner argued that the refund was not a duty but an amount wrongfully collected, thus not subject to Section 27A of the Customs Act. The revenue disagreed, stating that any refunded amount bears the character of duty unless extorted without legal authority. The court referred to Section 27A, which mandates interest on delayed refunds if not paid within three months from the application date. The petitioner’s application was filed on 13.11.2017, and the refund was rejected on 09.12.2018. The court concluded that the differential duty was not passed on to consumers, thus no remand was necessary. The refund claim was allowed, and interest at 6% was ordered from 14.06.2016 until repayment.

Conclusion:
The court set aside the impugned order, allowing the writ petition. It directed the respondents to pay interest at 6% on the refunded amount from 14.06.2016 until the date of repayment, within four weeks from the order receipt. The decision emphasized the importance of judicial discipline and adherence to higher appellate authorities' orders.