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TMI Blog2003 (9) TMI 90X X X X Extracts X X X X X X X X Extracts X X X X ..... es [ 1996 (12) TMI 50 - SUPREME COURT] has been remedied by the Legislature, by Act 21 of 1998 Clause (eb) has been inserted to the definition of 'relevant date' contained in Section 11B of the Central Excise Act with effect from 1-8-1998. Similarly by Notification No. 458 (E), dated 25-6-1999, Rule 9B of the Central Excise Rules, 1944 has been amended. As a result of these amendments, the refunds arising on finalisation of provisional assessment under Rule 9B is subjected to the procedure established u/s 11B(2) of the Centra1 Excise Act. The amended provisions of Rule 9B has been recently considered by the Apex Court in the case of Commissioner of Central Excise v. T.V.S. Suzuki Ltd.[ 2003 (8) TMI 42 - SUPREME COURT] and it is held by the Apex Court that the refund claims arising under Rule 9B prior to 25-6-1999 will not be governed by the restrictions in Section 11A and Section 11B of the Central Excise Act. In other words, after 25-6-1999, even the refunds arising under Rule 9B(5) are governed by the provisions of Section 11B of the Central Excise Act. Thus, in view of the above lacuna in the Central Excise Law, the Apex Court in the case of Mafatlal Industries held that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... laimed in the petition has already been recovered by the Petitioners from their customers. However, it is the case of the Petitioners that where refund arises on finalisation of the provisional assessment, the Customs authorities are obliged to refund the excess amount under Section 18(2) of the Customs Act even though the Petitioners have recovered that amount from the customers. In other words, the submission is that for refund arising under Section 18(2) of the Customs Act neither the limitation nor the principles of unjust enrichment incorporated in Section 27 of the Customs Act are applicable. 2. Petitioners. are engaged in the business of importing various alcoholic preparations into India. During the period from February to July, 1986, the Petitioners had imported 7 consignments of compound alcoholic preparations on (concentrated extracts) for the manufacturing of Whisky and had filed bills of entry for home clearance. Since the goods were not allowed clearance, the Petitioners filed Writ Petition No. 2031 of 1986 in this Court. Pursuant to the interim order passed in the said Writ Petition No. 2031 of 1986, the 7 consignments were assessed provisionally under Section 18 of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r dated 1-12-1992, the Petitioners requested for an adjournment. The Respondent No. 2 declined to grant adjournment and by an ex parte order dated 4-12-1992 rejected the refund claim as time-barred. It was further held that the amount deposited by the Petitioners was not under the provisional assessment and in the absence of any documentary evidence to establish that the refundable amount has not been recovered from the customers, the claim is liable to be rejected as unsubstantiated and in admissible under Section 27 of the Customs Act. Petition has been amended to challenge the above ex parte order. The Constitutional validity of Section 27 of the Customs Act was also challenged in the petition, however, the same is not pressed at the final hearing. 6. Mr. Bharucha, learned Senior Advocate appearing on behalf of the Petitioners submitted that the impugned order incorrectly proceeds on the basis that the amount deposited by the Petitioners was not on account of provisional assessment made under Section 18 of the Customs Act. He submitted that from the endorsements made on the Bills of Entry and from the Bond executed by the Petitioners which is accepted by the Respondents, it is c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to Mr. Bharucha in the above illustration, the refund of Rs. 200/- arising on finalisation of the assessment is governed by Section 18(2) and for the refund of Rs. 200/- arising after finalisation of the assessment, the Explanation II to Section 27 of the Customs Act would apply. Accordingly, it was submitted that in the present case the refund arises on finalisation of the provisional assessment and, therefore, the refund is required to be made under Section 18(2) and not under Section 27 of the Customs Act. 9. In support. of his contention Mr. Bharucha relied upon the decision of the Apex Court in the case of Mafatlal Industries Ltd. v. Union of India reported in 1997 (89) E.L.T. 247 (S.C.), particularly Para 95 of the said judgment, wherein it is held that where the duty provisionally assessed is in excess of the duty finally assessed, then, the excess amount refundable to the assessee consequent upon the adjustment under Rule 9B(5) will not be governed by Section 11B of the Central Excise Act, applying the same analogy, Mr. Bharucha submitted that the refund arising consequent upon the final assessment under Section l8(2), is not governed by the provision of Section 27 of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ith Rule 173J of the Central Excise Rules, 1944, the assessee is required to pay the deficiency in duty by adjustment in account current within ten days of receiving the assessed return. Relying upon this Judgment, Mr. Bharucha submitted that to a refund arising on finalisation of the assessment under Section 18(2), there is no question of filing a separate refund application. He submitted that any recoveries or refund consequent upon finalisation of the provisional assessment under Section 18(2) are not governed by Section 28 or Section 27 of the Customs Act. 14. Mr. Desai. learned Senior Advocate appearing on behalf of the Respondents, on the other hand submitted that the amount deposited by the Petitioners at the time of clearance of the goods represents deposit of provisional duty. He submitted that Section 27 refers to refund of duty paid pursuant to an order of assessment. The term 'assessment' is defined under Section 2(2) of the Customs Act to include provisional assessment. Therefore, the application required to be made under Section 27 for refund of duty includes refund of duty paid under the provisional assessment. Accordingly, it was submitted that the Customs A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sions of Section 11B of the Central Excise Act. Applying the same analogy, Mr. Desai submitted that, in the present case, the refund arising under Section 18(2) of the Customs Act being the subject matter of the present Writ Petition, if any order for refund is passed in this Writ Petition then it will be governed by the provisions of Section 27 of the Customs Act. 17. Mr. Desai. referred to the decision of the Apex Court in the case of Union of India v. Jain Spinners Ltd. reported in 1992 (61) E.L.T. 321 (S.C.) and submitted that Section 27 is the only section under the Customs Act which deals with the refund and in view of the amendment to Section 27 with effect from 20-9-1991 refund can be granted only if the duty element is not passed on to the customer. In the present case, admittedly the duty element is passed on to the Customer and, therefore, the Petitioners are not entitled to any relief in the present petition. 18. In rejoinder, Mr. Sankhlecha submitted that once it is held that Section 27 of the Customs Act is not applicable to a refund arising or finalisation of the provisional assessment under Section 18(2) of the Customs Act, then, as held by the Apex Court in the cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the Court cannot assess or evaluate what would be the impact of a particular immunity and whether it would serve the purpose in view or not. The Court cannot substitute its views for the Judgment of the legislative bodies. He submitted that when the Parliament amended the Customs Act in 1991 and brought in the concept of unjust enrichment for grant of refund of duties, it was felt by the Parliament that such concept of unjust enrichment would not be applicable for refund of excess amount due to the assessee on finalisation of the provisional assessment. Therefore, the Counsel submitted that the Court must respect the legislative wisdom and not introduce the concept of unjust enrichment for refund of the excess amount arising on finalisation of provisional assessment under Section 18 of the Customs Act, 1962, especially when the Parliament has not made the said concept applicable to such refund. 21. It was urged that in view of specific statutory provision contained Section 18 of the Customs Act, even while granting relief in a Writ Petition, the concept of unjust enrichment cannot be made applicable to the refund arising consequent to finalisation of provisional assessment. Re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lanation II to Section 27 applies to refund arising after the finalisation of the provisional assessment and not to the refund arising on the finalisation of the provisional assessment. In the present case refund under Section 18(2) arises on finalisation of the provisional assessment and therefore, explanation II to Section 27 is not applicable. (iii) Section 27 applies to the refund of duty. The refund that arises under Section 8(2) is not refund of duty and therefore, Section 27 is not applicable to the present case. (iv) Assuming Section 27 applies, the principles of unjust enrichment incorporated in Section 27 with effect from 20-9-1991 does not affect the vested right to refund accrued to the petitioner prior to 20th September, 1991. (v) Even though the Petitioners have recovered the amount from the customers, their being no right with the Government to retain the refund arising under Section 18(2), the same must be directed to be refunded to the Petitioners with interest. 25.Let us take the last contention first. According to the Petitioners, even though they have recovered the amount from the customers, there is no right with the Government to retain the amount of refund an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he case of unconstitutional levy, the assessee would not be entitled to refund unless it is established that the incidence of duty has not been passed on to others, Thus, the ratio laid down by the Apex Court in the case of Mafatlal Industries (supra), Solar Pesticides Pvt. Ltd. (supra) and S.R.F. Limited (supra) conclusively establish that all claims of refund under the Customs Act must pass the test of 'unjust enrichment' contained in Section 27 of the Act and unless it is established that the duty element has not been passed on to others, no refund can be granted. In the light of the above dictum laid down by the Apex Court, it is not open to the Petitioners' to contend that in respect of the refund arising under Section 18 of the Customs Act, the principles of unjust enrichment contained in Section 27 of the Customs Act are not applicable. In the present case, since the incidence of duty element has been admittedly passed on to the consumer, no direction can be given to the Customs Authorities to refund the amount as it results in unjust enrichment to the Petitioners. 27. The contention of the Petitioners that once the refund is due under Section 18(2), then the Cus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... does not apply to refund due under Section 18 and the Customs authorities are obliged to refund the amount due under Section 18 without the application of Section 27 cannot be accepted. 28. The next contention of the Petitioners that the Explanation II to Section 27 applies to the refund arising after the finalisation of the assessment and not to the refund arising on finalisation of the assessment is also without any merit. According to the Petitioners, if the amount paid provisionally is Rs. 1000/- and the duty finally assessed is Rs. 800/- then to obtain refund of Rs. 200/- (Rs. 1000 - Rs. 800) the Explanation II to Section 27 is not applicable. According to the Petitioners, it is only when the assessee feels that the amount of duty should have been limited to Rs. 600/- then to recover the differential amount of Rs. 200/- (Rs. 800 - Rs. 600) the Explanation II to Section 27 would apply. This ingenious argument is wholly unsustainable. Once the duty is paid provisionally under Section 18(1) of the Act, any refund of that amount would arise only on final assessment and not otherwise. An importer cannot apply for refund of duty paid provisionally unless there is final assessment or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t, if the duty determined is less than the duty provisionally paid, then the differential amount of duty is liable to be refunded. Therefore, the words 'amount so paid' in Section 18(2)(a) are referrable to the amount of duty paid on provisional assessment. It cannot be said that because the words 'amount so paid' is used in Section l8(2)(a), the payment made provisionally is not payment of provisional duty. The heading of Section 18 of Customs Act itself is 'provisional assessment of duty'. Moreover, Section 18(1) expressly uses the words 'duty provisionally assessed'. Therefore, what is assessed provisionally under Section 18 is the duty and the imported goods are cleared for home consumption under Section 47 of the Customs Act only on payment of duly, whether assessed provisionally or finally. In either case, the amount paid is duty. If, on final assessment, the duty paid provisionally is found to be more then, the differential amount become refundable, subject to the limitation prescribed under Section 27 of the Customs Act. The contention of the Petitioners that the amount paid on provisional assessment is not duty cannot be accepted, because wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Industries (supra) has held that only in case of recoveries or refunds consequent upon the adjustment of Industries (supra) has held that only in the case of duty determined on finalisation of provisional assessment under Rule 9B(5) will not be governed by the provisions contained in Section 11A or Section 11B of the Central Excise Act. The Apex Court has not laid down that even in case of finalisation of the provisional assessment under Section 18 of the Customs Act, the provisions of Section 27 of the Customs Act are not applicable. There is a sound reason behind it. Under the Customs Act, since inception, the recoveries or refund arising on finalisation of the provisional assessment have been expressly subjected to the limitation prescribed under Section 27 of the Customs Act. Initially Explanation I to Section 27 provided for the limitation to claim refund of duty provisionally assessed under Section 18 of the Customs Act. By Act 21 of 1998 (with effect from 1-8-1998), the Explanation I to Section 27 has been renumbered as Explanation II. Thus, under the Customs Act, the refund of duty arising on finalisation of the provisional assessment has always been subject to the procedur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he judgment of the Apex Court in the case of Mafatlal Industries (supra), the refund arising under Section 18 of the Customs Act cannot be subjected to the provisions of Section 27 of the Customs Act, cannot be accepted. Since refunds arising under Section 18 of the Customs Act has been expressly subjected to the procedure prescribed in Section 27 of the Customs Act, it is not open to the Petitioners to contend that the Parliament in its wisdom thought it fit not to subject the refunds arising on finalisation of provisional assessment within the purview of Section 27 of the Customs Act. 34. The decision of the Apex Court in the case of Sinkhai Synthetics Chemicals Private Limited (supra) does not in any way support the case of the Petitioners because it merely follows the decision of the Apex Court in the case of Mafatlal Industries. As stated here in above the decision of the Apex Court in the case of Mafatlal Industries (supra) is distinguishable on facts. Similarly, the decision of the Apex Court in the case of Serai Kella Glass Works (supra) is also distinguishable on facts. 35. The decision of the CEGAT in the case of Alcatel Modi Networks systems v. Commissioner of Customs, N ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be binding. However, in the present case, the very foundation of the order of the Tribunal is based on the decision of this Court in the case of Solar Pesticides Limited and the judgment of this Court in the case of Solar Pesticides has been overruled by the 3 Judges Bench of the Apex Court [see 2000 (116) E.L.T. 401 (S.C.) = SCC 2000 (2) 705]. Therefore, if the decision of the Tribunal in the case of Alcatel Modi is held to be approved by the 3 Judges Bench of the Apex Court, then the decision of the Apex Court in the case of Alcatel Modi becomes directly in conflict with the 3 Judges Bench decision of the Apex Court in the case of solar Pesticides Limited (supra). 38. While dismissing the Appeal filed by the revenue against the decision of the Tribunal in the case of Alcatel Modi, the 3 Judges Bench of the Apex Court did not doubt the correctness of the 3 Judges Bench decision of the Apex Court in the case of Solar Pesticides Limited (supra). Therefore, as held by the Apex Court in the case of Vijaylaxmi Cashew Co. v. CTO reported in (1996) 1 S.C.C. 468 decision of a Bench not doubted by any later Bench cannot be treated as overrules by implication. Accordingly it must be held t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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