C.C. Ahmedabad Vs Shell Energy India Private Limited (CESTAT Ahmedabad)
Facts- The appellant was engaged in import of Liquified Natural Gas. The present dispute relates to 24 bills of entries. The appellant filed BOE for an estimate quantity of Liquified Natural Gas (LNG) and declared the value on the basis of provisional invoice issued by the foreign supplier. Part payment was also made to the foreign supplier on the basis of the provisional invoice. The value of import was declared on “Delivered Ex-Ship” basis.
After all the clearance process, the appellant filed refund claim for these 24 BOE. The Assistant Commissioner of Customs (Surat) sanctioned the refund claim covering all 24 BOE but the said amount were ordered to be credited to Consumer Welfare Fund on the ground on unjust enrichment.
Conclusion- 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.
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 instant case, by creating an entry for receivables and thereafter, creating an entry for provision in the ledgers, the appellant has nullified these entries. Consequently, the entire amount of duty paid is passed on as an expenditure to the profit and loss account. Thus the appellant has failed to discharge the burden of unjust enrichment.
FULL TEXT OF THE CESTAT AHMEDABAD ORDER
These appeals have been filed by M/s Shell Energy India Private Limited against denial of refund claim. Appeal has also been filed by Revenue against part of the order.
2. The facts of the case are that the appellant were engaged in import of Liquified Natural Gas. The present dispute relates to 24 bills of entries. The appellant filed bills of entry for an estimate quantity of Liquified Natural Gas (LNG) and declared the value on the basis of provisional invoice issued by the foreign supplier. Part payment was also made to the foreign supplier on the basis of the provisional invoice. The value of import was declared on “Delivered Ex-Ship” basis. It was argued that due to following reasons, 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 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-inOriginal 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 Consumer Welfare Fund on the ground on unjust enrichment. Aggrieved by the said order, the appellant filed appeals before the Commissioner (Appeals). The Commissioner (Appeals) vide Order-inAppeal dated 14.12.2009 set aside both the orders and remanded the case back to the original adjudicating authority for passing fresh order on the basis of terms set out in the order. The Commissioner (Appeals) had order observed as follows in the said order:
“From the foregoing discussions, I find that the provisions of unjust enrichment are applicable to the present refund claims where provisional assessments involve the period on or after 13.07.2006. While the adjudicating authority has fallen into an error in disposing of the refund claims against the appellant without admitting the evidences in the form of Balance sheets and CA Certificates, the appellant claimant was also found wanting so far as submission of the books of accounts explaining the effect of relevant entries made in the balance sheets called for by the adjudicating authority for examination of the claims are concerned. Under these circumstances, it is found desirable in the interest of justice that the impugned orders-in-original are set aside and the appellant given another chance to submit before the original authority further evidences including the copies of books of accounts which explain the effect of relevant entries in the respective audited balance sheets to rebut the presumption of 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 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 (Tni. 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 CESTAT Larger Bench, Ahmedabad judgement in CC, Kandla Vs. Hindustan Zinc Ltd. (2009 (235) ELT 629 (Tri. -LB)). I find that the impugned 04 bills of entry have been assessed provisionally prior to 13.07.06 and finally after 13.07.06. Thus, at the time of the final assessment, the amended provisions of Section 18 were in force and hence the same will be applicable to the refund claims arising out of the final assessment made on or after applicable to the refund claims arising out of the final assessment made on or after 13.07.06. Moreover, under the Customs Act, the refunds arising out of finalization or provisional assessment have been expressly subjected to the limitation prescribed under Section 27 of the Customs Act, since inception. 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 01.08.98), the Explanation I to Section 27 has been remembered as Explanation II. Thus, under the Customs Act, the refund of duty arsing out on finalization of the provisional assessment has always been subject to the procedure prescribed under Section 27 of Customs Act. Therefore, whether prior on or after to amendment, the provisions of unjust enrichment are applicable to refunds arising on finalization of provisions assessment. In the case laws referred by the Commissioner (Appeals), it has been held that the principles of unjust enrichment found in 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 (Tni. 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 was incumbent upon the Adjudicating Authority to pay refund arising out of 4 bills of entries which were assessed provisionally prior to 13.07.2006 without invoking the provisions of unjust enrichment. He took note of the fact that the decision of Hon’ble High Court of Gujarat in case of Hindalco Industries Ltd. (supra) was not followed on the ground that Revenue has filed an appeal before the Hon’ble Apex Court which is still pending. Commissioner (Appeals) held that once the decision of Hon’ble High Court is available and the same has not been set aside, the same should have been followed even if the said order has been challenged before the Hon’ble Apex Court. He, therefore, set aside the impugned order in respect of these 4 bills of entry and held that the provisions of unjust-enrichment is not applicable to the refund arising out of these 4 bills of entry.
3.2 Aggrieved by this part of the order, Revenue is in appeal. The Revenue has argued that the decision of Hon’ble High Court of Gujarat in the case of Hindalco Industries (supra) has been challenged in the Apex Court and the same is pending. The Revenue has relied on the decision of Hon’ble High Court of Bombay rendered in the case of M/s Bussa Overseas and Properties Ltd. wherein it was held that the refund arising from finalization from finalization of provisional assessment is governed by limitation prescribed under Section 27 of the Customs Act and the Customs authorities are under no obligation to 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 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 authority and directs that the same should be decided in terms of decision of the Hon’ble High Court of Gujarat in the case of Hindalco Industries Ltd. (Supra) and also the decision of the Larger Bench in the case of Hindustan Zinc Ltd.(supra). If the Revenue was aggrieved by the said decision on account of decision of Hon’ble High Court of Bombay in case of M/s Bussa Overseas and Properties Ltd. approved by the Hon’ble Apex Court then they should have challenged the order of the Commissioner (Appeals). Having accepted the order of the Commissioner (Appeals) it is not open to the Revenue to now raise the issue relating to non-applicability of the decision of Hon’ble High Court of Gujarat in the case of Hindalco Industries Ltd. (supra) and the decision of Larger Bench of Tribunal in the case of Hindustan Ltd (Supra). In the aforesaid background, we find that the sole ground raised by the Revenue in its appeal relying 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 cannot been accepted, and therefore, the Revenue’s appeal is dismissed.
4. Assessee Appeal-The Shell Energy India Pvt. Ltd. (SEIPL) appellants have filed the appeal in respect of the other 20 bills of entry on the grounds that
a) the refund has been claimed for duty paid on goods, that have not arrived in India. They have relied on the following decisions:-
