2024 (12) TMI 964 - AT - Customs

Rejection of Refund claim on the ground of being barred by limitation in terms of section 27(1) of the Customs Act, 1962 - non-submission of TR6 challan in original as proof of EDD paid - HELD THAT - Article 265 of the Constitution of India prescribes that no tax shall be levied or collected except by the authority of law. Since the deposit is not a tax the question of the department retaining the amount even after the assessment is finalised does not arise. It has to be returned to its rightful depositor. The Hon ble Supreme Court in Mafatlal Industries Ltd. Ors. v. Union of India 1996 (12) TMI 50 - SUPREME COURT had examined a similar matter relating to duty paid at the time of provisional assessment. The Hon ble Court held that ' Any recoveries or refunds consequent upon the adjustment under sub-rule (5) of Rule 9B will not be governed by Section 11A or Section 11B as the case may be. However, if the final orders passed under sub-rule (5) are appealed against - or questioned in a writ petition or suit, as the case may be, assuming that such a writ or suit is entertained and is allowed/decreed - then any refund claim arising as a consequence of the decision in such appeal or such other proceedings, as the case may be, would be governed by Section 11B. It is also made clear that if an independent refund claim is filed after the final decision under Rule 9B(5) reagitating the issues already allowed, it would obviously be governed by Section 11B. It follows logically that position would be same in the converse situation.' Hence when in the case of provisionally assessed duty which was paid and subsequently found to be in excess, the refund was declared to be not covered by the refund provisions of the statute, it is even lesser so in the case of an amount collected as a security deposit pending final assessment. The question of the security deposit which is not a tax, being passed on does not arise and thus the unjust enrichment angle is also not involved. The Hon ble Madras High Court, in COMMISSIONER OF CUS. (EXPORT), CHENNAI Vs SAYONARA EXPORTS PVT. LTD. 2015 (3) TMI 861 - MADRAS HIGH COURT , examined the decision of this Tribunal in, COMMISSIONER OF CUSTOMS, CHENNAI Vs SAYONARA EXPORTS PVT. LTD. 2006 (8) TMI 455 - CESTAT, CHENNAI , which had held that ' When the statute says that the assessee is entitled to refund upon finalisation of assessment, the money is liable to be refunded to him without insisting-on a formal claim for refund.' The Hon ble High Court in its judgment examined and answered the question of law which was framed as, Whether the Tribunal was right in holding that the 1st respondent is entitled for automatic refund of the Extra Duty Deposit made pending finalisation of the provision assessment without filing an application for refund under Section 27 of the Customs Act, 1962? , in favour of the party and against the department. This being so, judicial discipline requires that all quasi-judicial authorities abide by the decision of the jurisdictional High Court. The impugned order hence merits to be rejected. In the case of the lone BoE where the original TR6 challan was not produced, if the same has still not been produced it may be dealt with by taking an indemnity bond as per departmental procedure, in the peculiar facts of this case. The impugned order is set aside - appeal is allowed.

Summary

Issues:
1. Refund claim rejection based on limitation under Customs Act, 1962.
2. Obligation of finalizing provisional assessments and returning security deposit.
3. Interpretation of Section 27 of the Customs Act regarding refund claims.
4. Application of CBEC Circular No. 5/2016-Customs.
5. Constitutional validity of retaining security deposit post final assessment.
6. Precedents set by the Hon'ble Supreme Court and Madras High Court regarding refund claims.

Issue 1: Refund claim rejection based on limitation under Customs Act, 1962
The appellant imported goods and filed a refund claim for Extra Duty Deposit (EDD) amounting to Rs.26,79,183. The claim was rejected by the Ld. Original Authority citing limitation under sec. 27(1) of the Customs Act, 1962. The appellant contended that the rejection was wrongful and prayed for the appeal to be allowed. The Ld. AR reiterated the limitation provision under the Customs Act and argued that the claim was time-barred.

Issue 2: Obligation of finalizing provisional assessments and returning security deposit
The appellant argued that post final assessment, the deposit amount collected as security (EDD) should be returned to the depositor, as per the CBEC Circular No. 5/2016-Customs. The Tribunal noted that the importer is not required to apply for finalization of provisional Bills of Entries, and the deposit amount is no longer required to be held by the department post final assessment.

Issue 3: Interpretation of Section 27 of the Customs Act regarding refund claims
The appellant contended that they were not obligated to file a refund claim under Section 27 of the Customs Act for the return of security deposit/EDD. The Ld. AR argued that the limitation period for refund claims is computed from the date of adjustment of duty after final assessment or re-assessment.

Issue 4: Application of CBEC Circular No. 5/2016-Customs
The Tribunal highlighted the provisions of CBEC Circular No. 5/2016-Customs, emphasizing that upon receipt of the Investigative Report, Customs Stations must immediately finalize provisional assessments without requiring the importer to apply for finalization. This indicates that the deposit amount collected as security should be returned post final assessment.

Issue 5: Constitutional validity of retaining security deposit post final assessment
Article 265 of the Constitution of India mandates that no tax shall be levied or collected except by the authority of law. The Tribunal noted that since the deposit is not a tax, it must be returned to the rightful depositor post final assessment, as per the decision in Mafatlal Industries Ltd. v. Union of India.

Issue 6: Precedents set by the Hon'ble Supreme Court and Madras High Court regarding refund claims
The Tribunal referred to the decision of the Hon'ble Madras High Court in COMMISSIONER OF CUS. (EXPORT), CHENNAI Vs SAYONARA EXPORTS PVT. LTD., which held that the assessee is entitled to refund upon finalization of assessment without requiring a formal claim. The Tribunal emphasized the importance of judicial discipline in following the decisions of higher courts.

In conclusion, the impugned order was set aside, and the appeal was allowed with consequential relief, in accordance with the law. The Tribunal directed the disposal of the appeal accordingly.