2023 (6) TMI 1060 - AT - Customs

Recovery of erroneous refund, without challenging the order sanctioning the refund - Refund of Additional Duty of Customs (CVD) (excess duty paid) - import of Mobile phones falling under CTH 851712 90 - N/N. 12/2012-C.E. dated 17.03.2012 - whether the incidence of excess paid CVD amount has been borne by the appellants and such incidence has not been passed on to any other person? - principles of unjust enrichment - HELD THAT - It is an admitted fact on record that re-assessment order passed in the disputed B/Es were not questioned or objected to by the department, which is evident from the fact that no appeals were preferred by the Revenue against the finally assessed B/Es. Thus, under such circumstances, the plea cannot be raised by Revenue that the re-assessment of B/Es are neither proper nor justified. Considering the ratio of judgement of Hon ble Supreme Court in the case of ITC 2019 (9) TMI 802 - SUPREME COURT , the Hon ble Bombay High Court in the case of Dimension Data India P. Ltd. 2021 (1) TMI 1042 - BOMBAY HIGH COURT , in a writ petition filed under Article 226 of the Constitution of India, have held that if there is an error in the B/Es, the same can be rectified by amendment in terms of Section 149 of the Customs Act, 1962. In the case in hand, the B/Es were re-assessed by the department pursuant to the applications filed by the appellant under Sections 149 ibid and 154 ibid. In the present case, the facts are not under dispute that the original orders dated 06.04.2019 and 26.02.2019 passed by the adjudicating authority in sanctioning the refunds in favour of the appellants were not challenged by Revenue before the Commissioner (Appeals). Therefore, with regard to those two adjudication orders, the matter has attained finality and the question of maintainability of the refund claims cannot be questioned by Revenue at a subsequent stage, by initiating proceedings under Section 28 ibid, for recovery of the refund amounts, considering the same as erroneous refund - under such circumstances, it cannot also be said that the grant of refund is erroneous and the same should be recovered by taking recourse to Section 28 ibid. Therefore, the impugned order, confirming the demand along with interest against the appellants under Section 28(1) ibid, read with Section 28(4) ibid, and Section 28AA cannot be sustained. Further, penalty imposed under Section 114A ibid, cannot also be sustained. Accordingly, the adjudged demands confirmed in the impugned order are set aside. Whether the amount in dispute should be credited to the CWF in terms of sub-section (2) of Section 27 ibid, or should it be paid forthwith by crediting the refund amount in favour of appellants in terms of the proviso appended to sub-section (2) of Section 27 ibid.? - HELD THAT - The provisions for grant of refund of duty are contained in Section 27 ibid. Sub-section (2) to Section 27 ibid, mandates that if the refund sanctioning authority is satisfied that the whole or part of the duty paid by the applicant is refundable, then he may make an order in crediting the refund amount to the CWF. On reading of the said statutory provision, it transpires that crediting the refund amount to the CWF is the rule and granting of the same as refund to applicant-assessee/importer is an exception, carved out in the proviso clause appended thereto. Any amount debited to the P L account has to be resulted in generation of revenue and accordingly, there lies no claim for recovery of this amount. On the other hand, without considering the same as expenses in the P L account, if the same is reflected in the Balance Sheet as Claims Receivable under the head Current Assets Loans and Advances , then it has to be construed that the incidence of the duties/taxes have not been passed on to any other person and the incidence of the same has been borne by the assessee/importer. Under such circumstances only, the benefit of refunds should accrue to the person who has paid such duty/tax to the Government exchequer. To put it differently, it can be said that if an amount paid is not charged to the revenue and carried as an asset in the Balance Sheet, then there lies a claim of recovery from the person against whom these amounts have been considered as recoverable for the given value. The matter should go back to the original authority for proper analysis of the books of accounts maintained by the appellants for a conclusion, as to whether the incidence of excess paid duty (claimed as refund) has been borne by the importer-appellants or transferred/passed on to any other person - the appeal is allowed by way of remand to the Original authority only for the limited purpose of examination of the applicability of doctrine of unjust enrichment - Appeal allowed by way of remand.

Summary

Issues Involved:
1. Entitlement to Refund of Differential Duty
2. Applicability of Doctrine of Unjust Enrichment

Summary:

1. Entitlement to Refund of Differential Duty:
The appellant imported mobile phones between 17.02.2014 and 24.04.2015, paying Additional Duty of Customs (CVD) at rates of 6% and 12.5%. Notification No. 12/2012-C.E. dated 17.03.2012 allowed a 1% CVD rate, subject to non-availment of Cenvat credit. Due to EDI system issues, the appellant couldn't avail this exemption. The Hon'ble Supreme Court in SRF Ltd. v. Commissioner of Customs, Chennai, ruled that such exemptions apply to imported goods. Consequently, the appellant filed refund claims for the differential duty under Section 27 of the Customs Act, 1962. The department reassessed the Bills of Entry (B/Es) and sanctioned the refunds, except for one order dated 03.08.2019, which was initially appealed by Revenue but later allowed by the Tribunal. The Tribunal confirmed that refunds arising from reassessed B/Es are permissible under the statute.

2. Applicability of Doctrine of Unjust Enrichment:
The appellant argued that the excess CVD was borne by them and not passed on to others, submitting balance sheets as evidence. However, the department contended that the refunds were treated as expenses in the Profit & Loss account, implying the incidence was passed on. The Tribunal noted contradictions in the appellant's claims and remanded the case to the original authority to examine the books of accounts in detail. The original authority must determine if the incidence of excess duty was borne by the appellant or passed on, focusing on specific entries in the financial records. If the excess duty was reflected as 'Claims Receivable' and not as expenses, the refund should be paid to the appellant. Otherwise, it should be credited to the Consumer Welfare Fund (CWF).

Conclusion:
The appeal was allowed by remand for the limited purpose of examining the applicability of the doctrine of unjust enrichment. The original authority is to complete the de novo adjudication within three months, ensuring the appellant is given a reasonable opportunity to present their case.