2024 (10) TMI 1186 - AT - Customs

Refund claim - principles of unjust enrichment - documentary evidence with the application did not suffice to overcome the presumption, under section 28D of Customs Act, 1962, of having passed on the incidence of the excess duty collected in the sale of goods manufactured by them - non-application of mind - HELD THAT - There are three inherent flaws in the impugned order. While the refund sanctioning authority was satisfied that the certificate of chartered accountant sufficed for the purpose of determining that incidence of duty had not been passed on, the first appellate authority found the same certificate to be deficient for want of such treatment from the year of provisional assessment and has placed on record absence of any other evidence having been submitted for discharge of onus. Consequently, without affording opportunity to the assessee to make good the then revealed gaps, the impugned order has gone on to hold that the assessee had been unjustly enriched. Moreover, in directing recovery for credit in the Fund, the impugned order has not indicated the means to be adopted while section 28 of Customs Act, 1962 is the explicitly available facility for recovery of erroneously granted refund, it is moot if an appellate authority can step into the shoes of the proper officer contemplated therein or supplant the application of mind inherent in such jurisdiction. It is also moot if action under section 142 of Customs Act, 1962 initiated by anyone other than proper officer or authority designated therein is valid in law. The present dispute may, in effect, be restated to posit that the case of customs authorities is that imported goods have been used in the year of procurement for manufacture and conversion into sale value in the selfsame year. The impugned order has not disputed the provisioning as receivables in 2019-20 and has accepted the certificate of chartered accountant to that effect. The appeal of Commissioner of Customs did not dispute it either. The backbone for discard of the claim is the purported inadequacy of certificate for not attesting to concurrence of provisioning with the period of dispute and that, in the absence of scrutiny of sale invoice, kicks in the presumption of section 28D of Customs Act, 1962 on the back of the decision of the Hon ble Supreme Court in COMMISSIONER OF CUSTOMS (IMPORT) , MUMBAI VERSUS M/S. DILIP KUMAR AND COMPANY ORS. 2018 (7) TMI 1826 - SUPREME COURT . On the finding that sale invoice considered by the first appellate authority is not liable to be brought into existence at that stage of proceedings and the presumption in law intended for different context, that the decision on strict interpretation of exemption notification has been misconstrued in the impugned order and that certificate has merely to attest transfer to receivables as sufficing to cross the bar of unjust enrichment , the impugned order lacks validity. The order of the original authority stands restored along with setting aside the order of the first appellate authority.

Issues Involved:
1. Adequacy of discharge of onus to establish that the refund did not result in 'unjust enrichment.'
2. Applicability of sections 28C and 28D of the Customs Act, 1962.
3. Validity of the certificate of the chartered accountant as evidence.
4. Procedural propriety in the appellate authority's decision to direct recovery for deposit in the Consumer Welfare Fund.

Issue-wise Detailed Analysis:

1. Adequacy of Discharge of Onus to Establish 'Unjust Enrichment':
The core issue revolves around whether the appellant adequately demonstrated that the refund of excess customs duty did not unjustly enrich them. The original sanctioning authority accepted the appellant's documentation, including a chartered accountant's certificate, as sufficient proof that the incidence of duty was not passed on to customers. However, the appellate authority challenged this, arguing that the certificate lacked details on how the refund was treated in the financial years 2017-18 and 2018-19. The appellate authority's decision to reject the refund claim was based on the absence of evidence showing the amount as 'receivables' in the relevant financial years, thus presuming the incidence of duty was passed on under section 28D of the Customs Act, 1962.

2. Applicability of Sections 28C and 28D of the Customs Act, 1962:
The appellate authority applied sections 28C and 28D, which presume that the incidence of duty is passed on to the buyer unless proven otherwise. However, the tribunal clarified that these sections pertain to the trading of imported goods and do not extend to goods used in further manufacturing processes. The tribunal emphasized that the appellant, who utilized the imported goods for manufacturing, was not subject to these presumptions. The tribunal also referenced the Supreme Court's decision in Union of India v. Solar Pesticides Pvt Ltd, which requires proof that the duty incidence was borne by the appellant.

3. Validity of the Certificate of the Chartered Accountant as Evidence:
The tribunal found fault with the appellate authority's rejection of the chartered accountant's certificate. The appellate authority had criticized the certificate for not aligning with the period of the dispute and for not scrutinizing sale invoices. However, the tribunal noted that the certificate's acknowledgment of the refund as 'receivables' in 2019-20 was not disputed by the Commissioner of Customs. The tribunal concluded that the certificate, along with provisioning as 'receivables,' sufficed to demonstrate that the duty incidence was not passed on, thus negating the notion of 'unjust enrichment.'

4. Procedural Propriety in the Appellate Authority's Decision:
The tribunal highlighted procedural errors in the appellate authority's approach. It criticized the appellate authority for not providing the appellant an opportunity to address the perceived gaps in evidence and for stepping beyond its jurisdiction by directing recovery for deposit in the Consumer Welfare Fund without following the procedure outlined in section 28 of the Customs Act, 1962. The tribunal also questioned the authority's reliance on the Supreme Court's decision in re Dilip Kumar & Co, which was deemed inapplicable as it pertained to exemption notifications, not unjust enrichment.

Conclusion:
The tribunal restored the original authority's order, setting aside the appellate authority's decision. It concluded that the appellant had adequately demonstrated that the duty incidence was not passed on, and the certificate of the chartered accountant, along with the provisioning as 'receivables,' provided sufficient assurance against unjust enrichment. The tribunal emphasized that the statutory provisions do not mandate provisioning from the year of import and that the appellate authority's restrictive approach was unwarranted.

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