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TMI Blog2022 (4) TMI 1213X X X X Extracts X X X X X X X X Extracts X X X X ..... ons, it is not possible to exactly measure the quantity of LNG in a ship: (i) Due to technical reasons, it is not possible to accurately calculate the quantity of LNG which had actually landed on the Indian shore without conducting technical estimation. (ii) Technical estimation is also required for the reason that vessel carrying LNG also consumes the same as fuel. Further such consumption depends on voyage time. (iii) Technical estimation is also required for the reason that LNG being gas is converted into liquid for ease of transportation and handling. During the voyage the same boils off as well. Further quantity of such boil off depends upon host of other variables e.g. weather condition, voyage time etc. It was also argued that in most of the cases, the quantity actually delivered on the Indian shore is not exactly the same as the quantity mentioned in the provisional invoice and therefore at the time of filing bill of entry both quantity as well as value are based on estimates only. 2.1 The said bills of entries were assessed provisionally for home consumption on the above count as well as for the reason that original documents and test reports were awaited. The appe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f unjust enrichment and the adjudicating authority another opportunity to examine the refund claims afresh in the light of all the evidences including the balance sheets, the CA's Certificate, appellate judgements noted above and pass a well reasoned order following the principles of natural justice." 2.3 The appellant did not challenge the said order-in-appeal. In remand proceedings, the Assistant Commissioner examined only the issue of unjust enrichment. After going through the sales agreement between the appellant and Gujarat State Petroleum Corporation dated 21.04.2006, sales invoices, ledger accounts of the customer, published balance sheets, Chartered Accountant Certificate, the Assistant Commissioner came to the conclusion that the appellants have not been able to establish that the burden of duty has not been passed on. 3. Revenue appeal-The order in original further examined the four cases relating to period prior to 13.07.2006. In respect of these case the remand order of Commissioner (Appeals) has specifically observed that the original authority needs to examine the actual date of provisional assessments and only thereafter decide the matter in view of the decision of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Section 27 of the Act cannot be read into the provisions of Section 18 of the Act without considering and applying the amendment to Section 18 with effect from 13.07.06. however, the Hindalco Industries Ltd. 2008 (231) ELT 36 (Guj.)) and filed SLP in the Hon'ble Supreme Court of India against the same, which is still pending for decision. Till the decision of Hon'ble Supreme Court, the matter cannot be said to have attained finality." The Assistant Commissioner sanctioned total amount of refund claim but transferred the same again to the Consumer Welfare Fund. Aggrieved by the said order, the appellant filed appeal before Commissioner (Appeals). 3.1 The Commissioner (Appeals) pointed out that as far as four bills of entry which were assessed provisionally prior to 13.07.2006 are concerned, specific directions were given in the earlier Oder-in-Appeal dated 28.04.2010 that the original adjudicating authority needs to follow the decision of Hon'ble High Court of Gujarat in the case of Hindalco Industries Ltd. 2008 (231) ELT 36 (Guj.) as well as the decision of Larger Bench of Tribunal in the case of Hindustan Zinc Limited 2009 (235) ELT 629 (Tri. LB). The Commissioner (Appeals) obs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... refund the amount due under Section 18 (2) of the Customs Act, 1962 without application of Section 27 of the Customs Act, 1962. In its appeal Revenue has argued that the provision of unjust-enrichment contained in Section 27 is applicable to refund arising under Section 18 of the Act. It has been argued that the decision of the Hon'ble High Court of Gujarat in the case of M/s. Hindalco Industries Ltd. is totally contrary to the decision of Hon'ble High Court of Bombay in the case of M/s Bussa Overseas and Properties Ltd., which was approved by the Hon'ble Apex Court vide order passed in Special Leave Appeal (Civil No. 21641 of 2003). It has been argued by the Revenue that the principles laid down by the Hon'ble High Court of Bombay in case of M/s Bussa Overseas and Properties Ltd. which has been approved by the Hon'ble Apex Court, the principle of unjust-enrichment would be applicable to the 4 bills of entry filed before dated 13.07.2006. 3.3 From the above it is seen that the Revenue is contesting the impugned order on the grounds that the decision of Hon'ble High Court of Gujarat in case of Hindalco Industries Ltd. (Supra) cannot be relied upon to grant refund without the test ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) * KRBL Ltd. 2008 (226) ELT 236 (Tri.-Mum.) * Pentair Water India Pvt. Ltd.2006 (202) ELT 817 (Tri.-Mum.) * Textool Co. Ltd. 1999 (111) ELT 826 (Tri. Mum.) * BASF India Ltd. 2006 (204) ELT 474 (Tri.-Mum.) b) The copies of the invoices submitted by the appellant clearly show that the excess duty paid by the appellant have not been passed on to the customers. c) The substantial condition for getting the refund has been fulfilled by the appellant. Merely making a 'provision' in the balance sheet does not imply that the burden of duty has been passed on to some other person. 4.1 It is seen that the said order of the Commissioner (Appeals) dated 14.12.2009 has taken note of the fact that all the goods were not received by the appellant and after examining the decisions relied by the appellant in this regard [reproduced in para 4 (a)] has come to the conclusions that the provisions of the unjust-enrichment would be applicable to the instant case. In these circumstances, it is not open to the appellant to agitate the issue regarding short receipt of goods once more relying on the same set of decisions. If they were aggrieved with the findings of the Commissioner (Appeals) in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... held that: 6.6 Now, adverting to the evidences submitted by the appellant to dispel the presumption of unjust enrichment, I find that the amount of Rs. 6,79,76,865/-shown as "Loans Advances" in Schedule-10 of the Balance Sheet for 2007-08 includes an entry for Rs. 1,73,14,185/ representing "Customs Advance - Others". Subsequently in the same schedule, the subject amount of Rs. 1,73,14,185/- stands deducted against "Less: Provision for Customs Advance-Others" bringing the net amount of "Loans and Advances" down to Rs. 5,06,62,680/-. The effects of these entries vis-à-vis the duty paid against the individual bill of entry are not decipherable unless it is explained with support of the books of accounts. Further, to illustrate with an example from appeal No.75/AHD/2009, the appellant has claimed differential duty refund of Rs. 1,76,004/ against bill of entry No. F-733/07-08 dated 26.12.2007 (Vessel LNG Cross River) but the entry in Sr.No.22 of the statement attached to the Certificate dated 26.12.2008 by the Chartered Accountants M/s GK Chokshi & Co., shows the recoverable amount as "Nil" which thoroughly contradicts the claim filed by the appellant. In similar certificate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it and Loss account. This means that if an expense has been incurred but yet not paid for, a liability for the unpaid amount must be created before the accounts can be said to show a true picture. Same way income earned but not received in cash also be taken into account. However, all expenses and income must be adjusted so as to show a figure which relates the whole trading period but only to the trading for which accounts are being prepared. * Applying what is stated herein above, in case there is doubt on realization of receivable recorded in the books of account, one has to make provision for the same in the year in which receivable are recorded. Now let us assume that a company has to receive a refund of Customs duty amounting to Rs. 2/- from Customs department. However, the company is not sure as to whether Customs department may sanction the refund or reject it. Though company has doubt as to Customs department accepting its refund claim, it does not want to write off in the books of account of this year. However, next year if Customs department. reject the refund claim, then it will be written off next year by the company. In above situation, a question arises is that whe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ettled law that if duty paid in excess is retained as "receivable" it the books of accountant and not charged as expense in profit and loss account of the claimant, bar of unjust enrichment will not operate. For example, is the case of Saralee Household & Body care (I) Pvt. Ltd. reported in [(2007 (210) ELT 42(tri-Chennai)] approved by the Madras High Court as reported in [ELT (216) ELT-685(Mad)]. From these facts and as per settled law, I can only conclude that the incidence of refund amount stands passed on to customers as cost of the "traded goods" in the relevant financial year and therefore refund is hit by doctrine of unjust enrichment. 8.2. With regard to showing profit in the next year by higher amount to the extent the refund sanctioned amount, I find that the result of total exercise of accounting adopted by the appellant is that they had accounted the refund amount in the books of account on actual receipt basis rather than accrual basis, which implied that it would be accounted for after receipt of refund. It means that at the time of filing the refund claim as well as sanction of refund no documentary evidence was available to rebut the presumption of unjust enrichme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in their books of accounts, the principle of unjust enrichment is not applicable to the facts of the present case. 3. The Appellants have submitted the definitions of "Provision" as per dictionary of Finance and Banking, Dictionary of Accounting, Dictionary of Business and Management for reference. As per these definitions it is clear that a "provision" is an amount set aside out of profits in the accounts of an organization for a known liability (even though the specific amount might not be known) of for the diminution in value of asset. Common examples include provisions for bad debts, provisions for depreciation and also provision for accrued liabilities. 4. Another essential feature of the "provision" as per dictionary meanings in it is appropriation of profit as the amount of "provision" is set aside out of the profits. Therefore, in fact, it is not a charge to profit & loss account and no part of the amount of "provision" can be said to be charged to any expenses. 5. The another reason for creating the provision for the amount of refund is prudent accounting policies. The accounting framework in India mandates that the enterprise should disclose its true and fair status ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not passed as expenditure in the profit and loss account. Ledgers are just accounts, the net effect of these accounts is reflected in the final figures in the profit and loss accounts as profit or loss. When a disputed receivable is shown as an asset then the impact of said entry is not passed to P&L account as the expenditure, consequently, the profit in the 'profit and loss statement' is enhanced by that amount. Similarly, as per appellant's own explanation above: "The reason for creating "provision" for the same amount of refund is by creating the "receivable" is that to the extent of creation of "receivable" in the books of account, the expenses towards the customs duty will be lesser". The appellant themselves have described it as 'balancing act'. By creating a receivable, the appellant has sought to exclude the said amount from expenditure. However, by creating the entry of 'provision', the effect of the 'receivable' entry gets reversed or nullified. 8. In the instant case, the appellant has paid a certain amount of customs duty. Thereafter, the appellant has sought to create an asset in the shape of 'receivables' so as to not pass the effect of payment of duty to the profit ..... X X X X Extracts X X X X X X X X Extracts X X X X
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