2022 (4) TMI 1213 - AT - Customs

Refund of Customs Duty paid - principles of unjust enrichment - expenditure written off while creating the entry as Receivable in the Balance Sheet - whether the appellants have been able to establish that the burden of duty has been passed on, or not? - actual date of provisional assessments - artificial accounting juggleries - HELD THAT - It is seen that when a person shows any amount as receivables it becomes an asset in the balance sheet. Consequently, the said amount is not passed as expenditure in the profit and loss account. Ledgers are just accounts, the net effect of these accounts is reflected in the final figures in the profit and loss accounts as profit or loss. When a disputed receivable is shown as an asset then the impact of said entry is not passed to P L account as the expenditure, consequently, the profit in the profit and loss statement is enhanced by that amount. In the instant case, the appellant has paid a certain amount of customs duty. Thereafter, the appellant has sought to create an asset in the shape of receivables so as to not pass the effect of payment of duty to the profit and loss account. To nullify the effect of the entry receivables , it has created a parallel entry exactly opposite to the receivables in its ledger as provisions . The net effect of creating receivables and provisions on profit and loss and balance sheet is that the customs duty paid is included in expenditure shown in profit and loss account. The legders on the one hand recognizes the disputed amount of customs duty as receivables (an asset) and simultaneously, creates a provision (a liability) for the same amount. These are obviously artificial accounting juggleries as the net combined effect of these two ledger entries in the profit and loss account is that the customs duty gets reflected in the profit and loss as expenditure. The reason why existence of the customs duty as receivables in the balance sheet is considered as evidence of not passing on the burden of customs duty to anybody else is because the said amount shown as receivable is not passed to profit and loss account as expenditure. As soon as a particular amount is charged to expenditure, it is deemed to have been recovered in the shape of the price of the goods. In the instant case, by creating an entry for receivables and thereafter, creating an entry for provision in the ledgers, the appellant has nullified these entries. Consequently, the entire amount of duty paid is passed on as an expenditure to the profit and loss account. Thus the appellant has failed to discharge the burden of unjust enrichment. Both revenue assessee appeals are dismissed.

Issues Involved:
1. Denial of refund claim by M/s Shell Energy India Private Limited.
2. Applicability of the doctrine of unjust enrichment to the refund claims.
3. Examination of refund claims for the period before and after 13.07.2006.
4. Evaluation of evidence provided by the appellant to rebut the presumption of unjust enrichment.

Detailed Analysis:

1. Denial of Refund Claim by M/s Shell Energy India Private Limited:
The appellant, M/s Shell Energy India Private Limited, engaged in importing Liquified Natural Gas (LNG), filed refund claims for customs duty paid on 24 bills of entry. The value and quantity declared were based on provisional invoices due to technical reasons that made it difficult to measure the exact quantity of LNG delivered. The customs duty was paid on a provisional basis, and after the final quantity was ascertained by an independent surveyor, the appellant sought refunds based on the actual quantity received.

2. Applicability of the Doctrine of Unjust Enrichment to Refund Claims:
The Assistant Commissioner initially sanctioned the refund claims but credited the amounts to the Consumer Welfare Fund, citing unjust enrichment. The Commissioner (Appeals) remanded the case, directing the Assistant Commissioner to re-examine the evidence, including balance sheets and Chartered Accountant Certificates, to determine if the burden of duty had been passed on.

3. Examination of Refund Claims for the Period Before and After 13.07.2006:
For the four bills of entry assessed provisionally before 13.07.2006 and finalized after this date, the Commissioner (Appeals) held that the doctrine of unjust enrichment did not apply, following the Gujarat High Court's decision in Hindalco Industries Ltd. The Assistant Commissioner, however, applied the amended provisions of Section 18 of the Customs Act, which included the doctrine of unjust enrichment, and transferred the refund amounts to the Consumer Welfare Fund. The Commissioner (Appeals) set aside this order, emphasizing that the Gujarat High Court's decision should be followed, even if challenged in the Supreme Court.

4. Evaluation of Evidence Provided by the Appellant to Rebut the Presumption of Unjust Enrichment:
The appellant argued that the excess duty paid was not passed on to customers, supported by invoices and balance sheets showing the refund amounts as "custom advance." However, the Commissioner (Appeals) noted that the balance sheets also included a corresponding provision for "custom advance," effectively nullifying the receivable entry and passing the duty as an expense in the profit and loss account. This accounting method did not convincingly rebut the presumption of unjust enrichment.

Conclusion:
The tribunal found that the appellant's method of accounting, which included creating receivables and corresponding provisions, resulted in the customs duty being passed on as an expenditure in the profit and loss account. Therefore, the appellant failed to discharge the burden of proving that unjust enrichment did not occur. Both the revenue's and the assessee's appeals were dismissed, upholding the Commissioner (Appeals)'s order.

Pronouncement:
The judgment was pronounced in the open court on 13.04.2022.

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