Case Law Details
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.
FULL TEXT OF THE CESTAT CHENNAI ORDER
This appeal is against Order in Appeal C. Cus. II No. 320/2023 dated 23.5.2023 passed by the Commissioner of Customs (Appeals – II), Chennai (impugned order).
2. Brief facts of the case are that the appellant has imported Tunneling Boring Equipment’s, parts and components vide 31 Bills of Entry (BOE) from the related supplier and the said BOE were assessed provisionally on payment of ‘Extra Duty Deposit’ (EDD). Later, the said BOE were finalized and the appellant filed refund claim for the 31 BOE on 9.3.2000 for refund of EDD amounting to Rs.26,79,183/- and the same was rejected by the Original Authority on the ground that the refund claim is barred by limitation in terms of sec. 27(1) of the Customs Act, 1962 in respect of 30 bills of entry and 1 bill of entry was rejected for non-submission of TR6 challan in original as proof of EDD paid. The appellant preferred an appeal before Commissioner (Appeals), who vide the impugned order rejected the appeal. Hence this appeal.
3. Shri N. Viswanathan, Ld. Advocate appeared for the appellant and Shri Harendra Singh Pal, Ld. Authorized Representative appeared for the respondent.
3.1 The Advocate submitted that the SVB on examination of their case issued the report dated 14.12.2018 accepting that the transactions in respect of 31 BEs, filed during the period 2016-2018 and assessed provisionally, are not influenced by their relation with the overseas suppliers. The proper officer was hence under a statutory obligation to finalize the provisional assessments in respect of the 31 bills and should have returned the cash security deposited by them in the form of EDD, on his own. However, the authorities only finalized the provisional assessment approving the duty already paid by them but did not cancel the bond furnished by them nor returned the cash deposit furnished by them amounting to Rs.26, 79,183/- towards EDD/security deposits. Even though they were not obligated to file a refund claim under Section 27 of the Customs Act 1962 for the return of security deposit / EDD, they obliged the request of the officers and filed a claim for refund as advised on 09.03.2020 along with an indemnity bond. However, the Ld. Original Authority after due process, passed order in original bearing no 83009/2021 dated 29.04.2021 wrongly rejecting their claim on the ground of limitation. He prayed that the Tribunal may be pleased to allow their appeal by setting aside the impugned order with consequential benefit of refund and render justice
3.2 The AR reiterated the points given in the impugned order and stated that, as per sub Section 2 [1][1B][c] of Section 27 of the Customs Act when any duty is paid provisionally under Section 18, the limitation of one year shall be computed from the date of adjustment of duty after the final assessment thereof or in case of re assessment from the date of such re assessment was done. Further in respect of one single bill of entry non-submission of copy of TR 6 challan in original was observed. Hence their claim was clearly time barred and their appeal merits to be rejected.
4. I have heard the Counsel for the appellant and the Ld. AR for revenue representing the contesting parties. I have also perused the Appeal Papers and considered the facts of the case. I find that the issue pertains to the refund of EDD made at the time when the BE was assessed provisionally, as the transaction was between related parties.
5. EDD is a security deposit requirement, made while provisionally assessing imported goods of related parties prior to final assessment. It is taken as a safe guard towards duty liability that may arise in future. As per CBEC circular no. 5/2016 dated 9th February 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 have been undertaken shall immediately proceed to finalise the same, without issuing a speaking order therein. This being so, as is the situation in the impugned case, the importer is not required to apply for the finalization of such provisional Bills of Entries. A natural corollary of which is that post the final assessment the deposit amount collected is no longer required to be held by the department and has to be returned to the person who made the deposit.
6. Article 265 of the Constitution of India prescribes that no tax shall be levied or collected except by the authority of law. Since the deposit is not a tax the question of the department retaining the amount even after the assessment is finalized does not It has to be returned to its rightful depositor. The Hon’ble Supreme Court in Mafatlal Industries Ltd. & Ors. v. Union of India [1997 (5) SCC 536 = 1997 (89) E.L.T. 247 (S.C.)] had examined a similar matter relating to duty paid at the time of provisional assessment. The Hon’ble Court held :-
“104. Rule 9B provides for provisional assessment in situations specified in clauses (a), (b) and (c) of sub-rule (1). The goods provisionally assessed under sub-rule (1) may be cleared for home consumption or export in the same manner as the goods which are finally assessed. Sub-rule (5) provides that “when the duty leviable on the goods is assessed finally in accordance with the provisions of these Rules, the duty provisionally assessed shall be adjusted against the duty finally assessed, and if the duty provisionally assessed falls short of or is in excess of the duty finally assessed, the assessee shall pay the deficiency or be entitled to a refund, as the case may be”. Any recoveries or refunds consequent upon the adjustment under sub-rule (5) of Rule 9B will not be governed by Section 11A or Section 11B as the case may be. However, if the final orders passed under sub-rule (5) are appealed against – or questioned in a writ petition or suit, as the case may be, assuming that such a writ or suit is entertained and is allowed/decreed – then any refund claim arising as a consequence of the decision in such appeal or such other proceedings, as the case may be, would be governed by Section 11B. It is also made clear that if an independent refund claim is filed after the final decision under Rule 9B(5) reagitating the issues already allowed, it would obviously be governed by Section 11B. It follows logically that position would be same in the converse situation.”
(emphasis added)
Hence when in the case of provisionally assessed duty which was paid and subsequently found to be in excess, the refund was declared to be not covered by the refund provisions of the statute, it is even lesser so in the case of an amount collected as a security deposit pending final assessment. The question of the security deposit which is not a tax, being passed on does not arise and thus the unjust enrichment angle is also not involved.
7. The 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 examined and answered the question of law which was framed 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.
8. This being so, judicial discipline requires that all quasi-judicial authorities abide by the decision of the jurisdictional High Court. The impugned order hence merits to be rejected. In the case of the lone BoE where the original TR6 challan was not produced, if the same has 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.
9. Based on the discussions above the impugned order is set aside and the appeal is allowed with consequential relief, as per law. The appeal is disposed of accordingly.
(Order pronounced in open court on 16.12.2024)
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