2021 (2) TMI 94 - HC - Customs

Refund of amount paid by the petitioner during the pendency of its appeal - duty paid under protest - unjust enrichment - petitioner had imported certain machineries for its printing purpose and availed the benefit of Customs Notification No.114/1980-Cus dated 19.6.1980 - HELD THAT - This Court has jurisdiction to entertain a writ petition even if it is assumed that provisions of the Section 27 of the Customs Act, 1962 are attracted or an alternate remedy exist. It would be unfair to relegate the petitioner to an alternate remedy at this distant point of time after a lapse of 13 years since the filing of this writ petition either to CESTAT or to the 2nd respondent to comply with the directions of the 1st respondent in the facts of this case. Hence, this case is examined on merits and disposed. In SUVIDHE LTD. VERSUS UNION OF INDIA 1996 (2) TMI 136 - BOMBAY HIGH COURT , the Bombay High Court had held that the claim raised by the Department in the show cause notice is thoroughly dishonest and baseless - It held that in respect of a deposit made under Section 35-F, provisions of Section 11-B can never be applicable. A deposit under Section 35-F is not a payment of duty but only a pre-deposit for availing the right of appeal. Such amount is bound to be refunded when the appeal is allowed with consequential relief. No order was required either under Section 129E or Section 35F of the respective enactments for deposit the disputed duty or penalty as a condition for hearing the appeal. Only when a person seeks for waiver or partial waiver, an order was required to be passed. These provisions have been liberalized in 2014. Now the maximum amount of pre-deposit has now been capped to 7.5% at the stage of first appeal and 10% at the stage of second appeal before the CESTAT - When the appeals were filed by the petitioner before the Hon ble Supreme Court, the petitioner was enjoined to pay the sums due to the Government as a result of an order passed under sub-section (1) of Section 129-B of the Customs Act, 1962 and 35C of Central Excise Act, 1944 in accordance with the order so passed by CESTAT. Deposits under Section 129E and Section 35F of the Central Excise Act, 1944 are made as a condition for hearing. Whereas, payments under Section 131 of the Customs Act, 1962 and Section 35N of the Central Excise Act, 1944 are not made as a condition for hearing appeal or reference before the High Courts or the Supreme Court. There are payments which were required to be made at the stage of first appeal and 2nd appeal before the Appellate Commissioner and the Tribunal (CESTAT formerly CEGAT) but were waived by these appellate bodies under the scheme of the Act - Therefore, the payments under Section 131 of the Customs Act, 1962 and Section 35N of the Central Excise Act, 1944 are payments which were delayed. Payments under all these provisions are also in the nature of pre-deposit are under the Act pending disposal of the appeals whether before the Appellate Commissioner and CESTAT or the High Court. They are not paid as duties. Section 27 of the Customs Act, 1962 as it reads could be pressed into service only in the case of refund of the any amount paid as duty in pursuance of an order of assessment or on the interest borne thereon by such person. It must be also recalled that Section 17 of the Customs Act, 1962 provides a machinery for assessment of duty. Under the scheme of the Act, customs duty is payable only pursuant to an order of assessment or final assessment where pre-assessment is resorted under Section 18 of the Customs Act, 1962 - Though in the present case there was no provisional assessment but only revision of assessment long after clearance under Section 28 of the Customs Act, 1962, it is to be noticed that even if duty was paid provisionally pending final assessment under Section 18 of the Customs Act, 1962, provisions of Section 27(5) of the Custom Act, 1962 would not have been attracted to the petitioner when the petitioner became entitled to refund. The Hon ble Supreme Court in MAFATLAL INDUSTRIES LTD. VERSUS UNION OF INDIA 1996 (12) TMI 50 - SUPREME COURT while dealing with payment of duty under protest under Rule 233B of the Central Excise Rules, 1944 as it stood in the context of Rule 9B of the aforesaid Rules held that both recoveries and refunds are to be not be governed by Section 11A and 11B of the Central Excise Act, 1944 . The amount paid by the petitioner on 21.03.2001 as a consequence of the recovery notice issued by the office of the Customs Department long after the completion of assessment and clearance of the imported goods pending its appeals before the Honourable Supreme Court cannot be said to be a duty for the purpose of Section 27 of the Customs Act, 1962. Therefore, presumption under section 28D of the Customs Act 1962 that the incidence of duty paid has been passed on to the buyer cannot be inferred - Amounts paid pursuant to an adverse order passed under Section 28 of the Customs Act, 1962 whether under Section 129E or under Section 131 of the Customs Act, 1962 are not duty for the purpose of Section 27 of the Customs Act.1962. From a reading of the provisions, it is clear that only refund of duty or interest thereon under Section 27 of the Customs Act, 1962 are governed by the doctrine of unjust enrichment under Section 27 of the Customs Act, 1962 - Pre-deposits as a condition under Section 129E of the Customs Act, 1962 or under Section 35F of the Central Excise Act, 1944 are not governed by the Section 27 and 11B of the respective enactments. In this case, it cannot be said that the amount that was paid pending the appeals was pursuant to an order of assessment before clearance of the goods from the customs barriers. The imported goods were not assessed to duty provisionally under Section 18 of the Customs Act, 1962 and cleared later. Imported machines were assessed to duty under Section 17 and cleared on the duty assessed by the proper officer - The amount that was paid by the petitioner was the amount that was affirmed as payable by the CESTAT pending the appeal before the Hon ble Supreme Court. The amount that was paid under protest at the appellate stage was long after the imported goods were cleared and assessed to duty. The petitioner has not sought for refund of amount paid as duty under Section 17 of the Customs Act, 1962. There is no evidence to suggest that the imported goods were also sold to a third party - Therefore, amounts deposited in terms of Section 131 of the Customs Act, 1962 or Section 35N of the Central Excise Act, 1944 has to be refunded without insisting on such importer or manufacturer satisfying the requirement of unjust enrichment as in the case of pre deposit under Section 129E of the Customs Act, 1927/Section 35F of the Central Excise Act, 1944. This Court is of the view that the 2nd respondent was not justified in subjecting the petitioner to limitation prescribed under Section 27 of the Customs Act, 1962. Therefore, the impugned order is liable to be interfered in this Writ Petition - The petitioner is however not entitled to interest at 12% as was prayed by the petitioner. The petitioner is entitled to interest at the rates prevailing for refund under notifications issued from time to time under Section 129EE of the Customs Act, 1962 for refund of pre-deposit made under Section 129E of the Customs Act, 1962 as the amount paid by the petitioner on 21.03.2001 was in the nature of pre-deposit under Section 131 of the Customs Act, 1961. Petition allowed in part.

Summary

Issues Involved:

1. Refund of amount paid under protest.
2. Application of the doctrine of unjust enrichment.
3. Jurisdiction of the High Court under Article 226.
4. Treatment of pre-deposit under Section 129E of the Customs Act, 1962.

Issue-Wise Analysis:

1. Refund of Amount Paid Under Protest:

The petitioner sought a refund of ?88,44,510/- paid "under protest" during the pendency of its appeal before the Supreme Court. The Supreme Court allowed the appeal, and the petitioner filed for a refund. The Deputy Commissioner of Customs rejected the refund, stating it would be credited to the Consumer Welfare Fund due to unjust enrichment. The petitioner argued that the amount was a pre-deposit, not a duty, and thus the doctrine of unjust enrichment did not apply.

2. Application of the Doctrine of Unjust Enrichment:

The petitioner contended that the amount paid was not a duty but a pre-deposit, and therefore, the doctrine of unjust enrichment under Section 27 of the Customs Act, 1962, did not apply. The court examined several precedents, including the Supreme Court's decision in Mafatlal Industries Ltd. vs. Union of India, which held that amounts paid under protest pending appeal are subject to refund procedures under Section 11B of the Central Excise Act, 1944, and Section 27 of the Customs Act, 1962. However, the court distinguished the petitioner's case, noting that the amount was paid long after the clearance of goods and was not a duty but a pre-deposit.

3. Jurisdiction of the High Court Under Article 226:

The court affirmed its jurisdiction under Article 226 of the Constitution to entertain the writ petition, despite the existence of alternate remedies. It emphasized that the High Court's power under Article 226 is plenary and cannot be curtailed by statutory provisions. The court decided to examine the case on merits due to the long pendency of the writ petition.

4. Treatment of Pre-Deposit Under Section 129E of the Customs Act, 1962:

The court analyzed whether the amount paid by the petitioner could be considered a pre-deposit under Section 129E of the Customs Act, 1962. It noted that pre-deposits made as a condition for hearing appeals are not considered duties and are refundable upon the appeal's success. The court concluded that the amount paid by the petitioner was akin to a pre-deposit under Section 131 of the Customs Act, 1962, and thus, the doctrine of unjust enrichment did not apply.

Conclusion:

The court allowed the writ petition, directing the respondents to refund the amount of ?88,44,510/- along with interest at the rates prevailing for refund under notifications issued from time to time under Section 129EE of the Customs Act, 1962. The interest was to be calculated from three months after the Supreme Court's order dated 31.03.2005. The court emphasized that the amount paid by the petitioner was not a duty but a pre-deposit, and thus, the doctrine of unjust enrichment did not apply. The writ petition was allowed with consequential relief, and no costs were awarded.