2022 (8) TMI 506 - AT - Customs

Refund claim - refund rejected on the ground that the bills of entry under which assessments were made were not assailed and unless the bills of entry were modified the refund cannot be sanctioned - if bills of entry have been self-assessed and goods are cleared on the basis of such self-assessment can a refund be sanctioned without self-assessed bills of entry being assailed and modified? - HELD THAT - Prior to 2011, assessment under Section 17 had to be done by the proper officer only. After 2011 section 17 has been amended and a system of self-assessment by the assessee has been introduced. This self-assessment under Section 17 (1) is subject to re-assessment under Section 17 (5) by the proper officer. It often happens that the Customs Risk Management System RMS selects some bills of entry only for assessment by the proper officer and other bills of entry are cleared on the basis of self assessment itself. Assessment is a quasi-judicial order which can be appealed against before the Commissioner (Appeals) by the importer or Revenue whether or not any speaking order is passed while assessing the bills of entry. Similarly, shipping bills in respect of exports can also be appealed against both by the Revenue and by the importers/ exporters - if duty has been paid in excess, a refund can be claimed under section 27 which is not a quasi-judicial, procedure to re-open the assessment. It has been held in the case of Priya Blue 2004 (9) TMI 105 - SUPREME COURT and Flock India 2000 (8) TMI 88 - SUPREME COURT that a refund can be sanctioned only if it follows from the assessment already made. If duty is paid in excess of the assessment the same can be refunded. Thus, refund of duty is a mechanical process of returning the excess duty paid. The officer sanctioning refund cannot sit in judgment or modify the assessment by the assessing officer. Any modification to the assessment is possible either by an appeal before the Commissioner (Appeals) or by issue of a notice under section 28. It was, therefore, held that no refund can be sanctioned so as to modify the assessment of bill of entry. As the issue is now settled by the Constitution Bench of the Supreme Court in ITC 2019 (9) TMI 802 - SUPREME COURT that no refund can be sanctioned even in cases of self-assessment without assailed the bill of entry - the refund cannot be sanctioned without assailing the self assessed bills of entry - Appeal allowed.

Summary

Issues:
- Appeal against the order-in-Appeal dated 01.06.2018 allowing the respondent's appeal.
- Refund claims rejection based on unassailed bills of entry.
- Interpretation of refund provisions post-2011 amendments.
- Assessment process under Section 17 pre and post-2011.
- Validity of refund sanction without assailing self-assessed bills of entry.
- Applicability of judgments in Flock India, Priya Blue, and Aman Medical Products.
- Constitution Bench ruling in ITC case regarding self-assessment and refund sanction.

Issue 1: Appeal against the order-in-Appeal
The appeal was filed by the Revenue challenging the order-in-Appeal dated 01.06.2018, where the Commissioner of Customs (Appeals) allowed the respondent's appeal, setting aside the order of the lower authority rejecting the refund claims based on unassailed bills of entry.

Issue 2: Refund claims rejection
The respondent importer's refund claims were rejected as the bills of entry under which assessments were made were not assailed. The lower authority held that unless the bills of entry were modified, the refund could not be sanctioned, leading to the appeal by the respondent.

Issue 3: Interpretation of refund provisions post-2011 amendments
The Revenue contended that the Commissioner (Appeals) erred in holding that post-2011 amendments to Section 27 of the Customs Act changed the refund provision, eliminating the conditionality that refunds could only be made after an order of assessment. The argument was that self-assessment is appealable, and no refund can be refused solely due to the absence of an appeal against the assessment order.

Issue 4: Assessment process under Section 17 pre and post-2011
The Tribunal discussed the evolution of the assessment process under Section 17, highlighting the shift to self-assessment by the assessee post-2011 and the subsequent re-assessment by the proper officer under Section 17(5). The Customs Risk Management System (RMS) was noted for selecting bills of entry for proper officer assessment while others were cleared based on self-assessment.

Issue 5: Validity of refund sanction without assailing self-assessed bills of entry
The central question revolved around whether a refund could be sanctioned without challenging self-assessed bills of entry. The Tribunal emphasized that refunds could only be sanctioned based on existing assessments, with modifications possible through appeals or notices under section 28, ruling out refund sanction to alter bill of entry assessments.

Issue 6: Applicability of judgments in Flock India, Priya Blue, and Aman Medical Products
The Tribunal analyzed precedents like Flock India and Priya Blue, emphasizing that refunds could only follow existing assessments without modification. The Aman Medical Products case was cited to address self-assessed bills of entry, with the High Court of Delhi allowing refunds without challenging such bills.

Issue 7: Constitution Bench ruling in ITC case
The Tribunal referred to the Constitution Bench's ruling in the ITC case, clarifying that even in cases of self-assessment, refunds could not be sanctioned without appealing against bill of entry assessments. The judgment highlighted the appealability of self-assessment orders and the necessity to challenge assessments for refund sanctions.

In conclusion, the Tribunal set aside the impugned order following the ITC ruling, emphasizing that refunds could not be sanctioned without challenging self-assessed bills of entry. The appeal was allowed in favor of the Revenue, aligning with the settled legal position established by the Supreme Court's interpretation.