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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 ..... of payment of duty to the profit and loss account. To nullify the effect of the entry receivables , it has created a parallel entry exactly opposite to the receivables in its ledger as provisions . The net effect of creating receivables and provisions on profit and loss and balance sheet is that the customs duty paid is included in expenditure shown in profit and loss account. The legders on the one hand recognizes the disputed amount of customs duty as receivables (an asset) and simultaneously, creates a provision (a liability) for the same amount. These are obviously artificial accounting juggleries as the net combined effect of these two ledger entries in the profit and loss account is that the customs duty gets reflected in the profit and loss as expenditure. The reason why existence of the customs duty as receivables in the balance sheet is considered as evidence of not passing on the burden of customs duty to anybody else is because the said amount shown as receivable is not passed to profit and loss account as expenditure. As soon as a particular amount is charged to expenditure, it is deemed to have been recovered in the shape of the price of the goods. In the ins ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 appellant paid customs duty on the basis of the provisional assessment made as above. On unloading of LNG independent surveyor carried out verification and inspection to ascertain the exact quantity delivered to the appellant. The surveyor gave a Certificate to the appellant. On the basis of surveyor s report, the supplier issued a credit note against the provisional invoice and thereafter final payment on the actual quantity received was made by the appellant to the supplier. In the instant cases, the appellant filed refund claim for these 24 bills of entries as detailed in the orders in original numbers 7 to 24/AC/SRT/.REF/2009, dated 17.02.2009 and OIO Nos. 28 to 33/AC/SRT/REF/209, dated 08.05.2009. 2.2 The Assistant Commissioner of Customs (Surat) vide Orders-in-Original dated 17.02.2009 and 08.05.2009 sanctioned the refund claim covering all 24 bills of entries but the said amount were ordered to be credited to Consum ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Hon ble High Court of Gujarat in case of Hindalco Industries Ltd. 2008 (231) ELT 36 (Guj.) and the decision of Larger Bench of Tribunal in the case of Hindustan Zinc Limited 2009 (235) ELT 629 (Tri. LB). The Assistant Commissioner observed that the said bills of entry were assessed provisionally prior to 13.07.2006 and finally after 13.07.2006. He observed that at the time of final assessment, the amended provision of Section 18 were in force and hence, the same will be applicable to the refund claims arising out of final assessment. He had observed that: Now I come to the point of applicability of the provisions of unjust enrichment in the 04 cases relating to the period prior t0 13.07.2006 when the provisions of Section 18 of the Act were amended after examination of these claims in the light of Hon ble Gujarat High Court judgement in CC vs Hindalco Industries Ltd. 2008 (231) ELT 36 (Guj.) as well as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thority 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) observed that the basic question whether refund of customs duty arising out of finalization of provisional assessment in terms of provisions of Section 18 of the Customs Act, 1962 relatable to the period prior to 13.07.2006 (when the provision of Section 18 was amended) would attract the doctrine of unjust enrichment or not stands decided in the favour of the appellant. He further observed that it was clearly held that provisions of unjust enrichment is not applicable to the refund claim arising out of finalization of provisional assessment prior to 13.07.2006. He further pointed out that the remand was only to ascertain the actual date of provisional assessment and to take decision accordingly. He observed that in respect of 4 bills of entries, the provisional assessment was done prior to 13.07.2006 and therefore, the Assistant Commissioner has failed to follow the remand directions. He observed that it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 of unjust-enrichment in respect of the 4 bills of entry assessed provisionally prior to date 13.07.2006. The Revenue is seeking to rely on the decision of Hon ble High Court of Bombay in the case of M/s Bussa Overseas and Properties Ltd. approved by the Hon ble Apex Court vide order passed in Special leaved appeal (Civil No. 21641 of 2003). It is seen that the order of Commissioner (Appeals) has decided certain issues which have not been challenged by either of the sides. Both the sides have accepted the said order consequently limited the scope of arguments that they can make in subsequent proceedings. 3.4 It is also seen that the said order the Commissioner (Appeals) dated 14.12.2009 also settles the issue regarding the applicability of the decision of Hon ble High Court of Gujarat in the case of Hindalco Industries Ltd. (Supra). The said order specifically remands the matter to the original a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 para 6.4 of the order dated 14.12.2009 then they should have challenged the same. Having failed to challenge the same, the appellant forgo their right to agitate the issues which were settled by the order of Commissioner (Appeals) dated 14.12.2009. 4.2 Now we come to the main issue decided by the impugned order which relates to the evidence produced by the appellant before the Commissioner (Appeals) in defense of its claim that they have not passed the burden of customs duty to anybody else. 4.3 The appellants have claimed that they have not passed the burden of Customs duty to anybody else on the strength of following assertions: (i) Invoices issued by them to their buyers do not contain any excess collection of customs duty. (ii) The balance sheets from the period 2006-07 onwards show the amount of refund as custom advance under the head of Loans and Advances / Long term ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ₹ 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 dated 16.02.2009 issued covering the period of 2008-09 by the same Chartered Accountant, identical amount of ₹ 1,76,004/-las been shown to have been subsequently added in January 2009 (2008-09). The Chartered Accountant's certificate does not explain as to how the amount of duty paid in 2007-08 was included in the books of accounts in the year (2008-09) and the effect of the said amount in the books for the year 2007-08 during which the expenditure was actually incurred for payment of duty. Since the certificates issued by the Chartered Accountant do not co-relate with the entries in the books of accounts and do not offer any explanation on the effect of the individual amounts in the books of accounts during the relevant financial year, no safe conclusions could be drawn from the documents illustratively exhibited by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 whether the loss is next's year loss or this year's loss? Obviously, this year's loss even if actual writing off is done next year. Therefore, better and correct way of accounting is that one should provide for the loss of this year and accordingly reduce this year's profit toward it and treat the amount provided as provision in its books of accounts. On Customs department rejecting refund claim, any amount that has to be written off next year shall be debited (reduced) out of the provision created in earlier year. Similarly, in the later year, if the Customs department accepts the refund claim and issue refund order, then the amount of refund granted shall be credited to profit and loss account that year and provision created shall be debited (reduced) to that extent and accordingly show pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ise 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 enrichment. The refund sanctioning authority, before sanction of the claim, has to examine the evidence for the fulfilment of non-applicability of unjust enrichment. As already held that every case of refund has to pass the test of unjust enrichment before its sanction and it is rebutted by adducing the documentary evidence, therefore, the accounting method on actual receipt basis followed by the respondent would not help them for getting the refund and claims are hit doctrine of unjust enrichment. The Chartered Accountant in his certificates his certified that appellant has not recovered the refund amount from their customers. It was further certified that no portion of refund amount has been charged as expenditure in the books of account of the company. The explanation given by the CA that how the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f 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 of the financial transactions. The Appellants have shown the eligible amount of refund as receivable in their books of accounts. 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 . This may result in disclosing higher amount of profit for a particular financial year. 6. By creating the same amount as provision there is appropriation from the amount of profit to arrive at the true amount of profit. In other words, the act of creating receivable and resultantly showing lesser amount of expenditure towards customs duty to that extent is compensated by creating the provision of the same amount out o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ating 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 and loss account. To nullify the effect of the entry receivables , it has created a parallel entry exactly opposite to the receivables in its ledger as provisions . The net effect of creating receivables and provisions on profit and loss and balance sheet is that the customs duty paid is included in expenditure shown in profit and loss account. The legders on the one hand recognizes the disputed amount of customs duty as receivables (an asset) and simultaneously, creates a provision (a liability) for the same amount . These are obviously artificial accounting juggleries as the net combined effect of these two ledger entries in the profit and loss account is that the customs duty gets reflected in the profit and loss as expenditure. 9. The appella ..... X X X X Extracts X X X X X X X X Extracts X X X X
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