2023 (2) TMI 76 - HC - Customs

Refund - Period of limitation - duty paid under protest or not - Importer had preferred an appeal challenging the enhancement of the value of the goods - whether the respondent s claim for refund of tax was beyond the period of limitation as prescribed under Section 27 of the Customs Act? HELD THAT - It is difficult for this Court to accept that the payment of custom duty imposed pursuant to an order while appealing the same can be construed as payment of duty without protest. The very act of filing an appeal against an order imposing customs duty is a protest against the duty as assessed. The entire purpose of such an appeal is to seek reduction of the levy. It is, thus, obvious that the assessee does not accept the said levy and, payment of the same would necessarily have to be construed as payment under protest. In view of the authoritative decision of the Supreme Court in Mafatlal Industries Ltd. v. Union of India 1996 (12) TMI 50 - SUPREME COURT , the question whether payment of duty while appealing its imposition, is required to be construed as payment under protest, is no longer res integra. Although the said decision was rendered in the context of Section 11B of the Central Excise Act, 1944, the second proviso to Section 11B of the Central Excise Act, 1944 is pari materia to second proviso of Section 27(1) of the Customs Act. The decision of learned Tribunal that the duty paid by the respondent on the enhanced value of the goods is required to be accepted as duty paid under protest, is agreed upon. Appeal dismissed.

Issues Involved:
1. Whether the respondent's claim for refund of tax was beyond the period of limitation as prescribed under Section 27 of the Customs Act.
2. Whether the duty paid by the respondent was required to be construed as duty paid under protest due to the respondent appealing against the enhancement of the value of the goods and the consequential enhancement in the custom duty payable.

Issue-wise Detailed Analysis:

1. Limitation Period for Refund Claim:
The principal controversy revolves around whether the respondent's claim for a refund of customs duty was beyond the period of limitation prescribed under Section 27 of the Customs Act. The customs duty was reassessed by the Adjudicating Authority after the respondent prevailed before the Commissioner of Customs (Appeal). However, the benefit of the reduction of duty was denied on the ground that the application for a refund was beyond the period of limitation. The Revenue argued that since the duty was initially paid on the enhanced value without protest, the respondent's claim for a refund, made beyond one year from the date of payment of duty, is barred by Section 27(1) of the Customs Act.

2. Duty Paid Under Protest:
The respondent contended that it had paid the customs duty under protest, as evidenced by the fact that it had appealed against the enhancement of the value of the goods and the consequent additional custom duty. Thus, it claimed entitlement to the benefit of the second proviso to Section 27(1) of the Customs Act, which states that the one-year limitation does not apply when any duty or interest has been paid under protest.

The Tribunal, following the Supreme Court's decision in Mafatlal Industries Ltd. v. Union of India, accepted the respondent's case, holding that since the respondent had filed an appeal challenging the levy of duty, the duty paid was to be considered as paid under protest.

Detailed Facts and Procedural History:
- The respondent imported goods from its parent company overseas between April 2004 and June 2008. The Revenue investigated whether the declared value was at arm's length due to the related party nature of the transaction.
- The Adjudicating Authority enhanced the declared value of the goods by varying percentages in an Order-in-Original dated 25/26.08.2004.
- The respondent appealed, and the Commissioner of Customs (Appeals) set aside the Order-in-Original and remanded the matter for reassessment.
- On reassessment, the Adjudicating Authority enhanced the declared value by 46% in an order dated 23.04.2009.
- The respondent filed for a refund of the excess duty paid, which was rejected on 31.08.2010 as being time-barred.
- Subsequent appeals by the respondent were rejected until the Tribunal, in an order dated 13.04.2016, set aside the rejection and remanded the matter.
- The Adjudicating Authority again rejected the refund claim on 02.08.2017, and the Commissioner of Customs (Appeals) upheld this decision on 22.08.2019.
- The respondent's appeal to the Tribunal was allowed, leading to the present appeal by the Revenue.

Reasons and Conclusions:
- The respondent's refund claim was filed on 14.04.2010, beyond one year from the date of payment of duty and beyond six months from the reassessment order dated 23.04.2009.
- The Revenue argued that the fourth proviso to Section 27(1) applied, requiring the refund claim to be made within six months from the date of the reassessment order.
- The Tribunal had previously rejected this contention, holding that the fourth proviso did not apply as the reassessment order was not by an appellate authority but by the Adjudicating Authority on remand.
- The core issue was whether the duty paid while appealing the original order could be considered as paid under protest.
- The Court found it difficult to accept that payment of duty while appealing could be construed as without protest. Filing an appeal against an order imposing customs duty is inherently a protest against the duty assessed.
- The Tribunal's reliance on the Supreme Court's decision in Mafatlal Industries Ltd. was upheld. The Supreme Court had clarified that payment of duty while contesting its levy in appeal is to be considered as payment under protest.
- The Court concurred with the Tribunal that the duty paid by the respondent on the enhanced value of the goods should be accepted as duty paid under protest.

Conclusion:
The question of whether the duty paid by the respondent was under protest was answered affirmatively. Consequently, the appeal was dismissed.

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