Herrenknecht India Pvt. Ltd. Vs Commissioner of Customs (CESTAT Chennai)
Conclusion: Refund of Extra Duty Deposit ( EDD ) was not subject to the limitation under Section 27 of the Customs Act, 1962, and should be returned upon finalization of provisional assessments without requiring a formal refund claim.
Held: Assessee-company imported Tunneling Boring Equipment and components through 31 Bills of Entry ( BOE ), which were provisionally assessed with the payment of EDD. It filed a refund claim for Rs. 26,79,183 towards EDD after the final assessment. The refund claim was rejected on grounds of limitation under Section 27(1) of the Customs Act for non-submission of the original TR6 challan for one BOE. COC (Appeals) upheld this rejection. Aggrieved, assessee approached the CESTAT. It argued that the EDD was a security deposit and not a tax, so it did not attract limitation under Section 27 of the Customs Act. Assessee explained that as per judicial precedents and CBEC Circular No. 5/2016 such deposits must be refunded post-final assessment without requiring a formal claim. Revenue contended that the refund claim was time-barred under Section 27(2) of the Customs Act. It argued that the absence of a TR6 challan further invalidated the refund claim. It was held that EDD was a security deposit requirement, made while provisionally assessing imported goods of related parties prior to final assessment. It was taken as a safe guard towards duty liability that may arise in future. As per CBEC Circular 5/2016-Customs dated 9th Feb, 2016, upon receipt of Investigative Report from the Special Valuation Branch for accepting the declared value under Rule 3 of the CVR, 2007, the Customs Stations where provisional assessments had been undertaken should immediately proceed to finalize the same, without issuing a speaking order therein. This being so, as was the situation in the impugned case, the importer was not required to apply for the finalization of such provisional Bills of Entries. Article 265 of the Constitution of India prescribed that no tax should be levied or collected except by the authority of law. Since the deposit was not a tax the question of the department retaining the amount even after the assessment was finalized did not arise as it had to be returned to its rightful depositor. Hon’ble Madras High Court, in COMMISSIONER OF CUS. (EXPORT), CHENNAI Vs SAYONARA EXPORTS LTD. [2015 (321) E.L.T. 583 (Mad.)], examined the decision of this Tribunal in, COMMISSIONER OF CUSTOMS, CHENNAI Vs SAYONARA EXPORTS PVT. LTD. [2007 (208) E.L.T. 439 (Tri. – Chennai)], which had held; “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 answered 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 required that all quasi-judicial authorities abide by the decision of the jurisdictional High Court. The impugned order hence merited to be rejected. In the case of the one BoE where the original TR6 challan was not produced, if the same had 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.
