Interest on Extra Duty Deposit not payable as importer failed to submit complete document

Vedanta Limited Vs Commissioner of Customs (Import) (CESTAT Chennai)

CESTAT Chennai held that interest on Extra Duty Deposit not payable by revenue since lapses were on the part of importer in not submitting complete document enabling revenue to finalize assessment. Accordingly, appeal disposed of.

Facts- The appellants have filed 67 refund claims during the period from August 2013 to November 2013 for an amount of Rs.7,61,48,316/- being the excess duty paid as per the orders of finalization of provisional assessments. After finalization of the provisional assessment, the adjudicating authority issued Order in Original for each In-bond Bills of Entry on different dates, mentioning the refundable excess paid duty amount and that the appellants are eligible for the refund of that excess paid amount. In the meanwhile, the department directed the appellants vide letter dated 16.9.2013 to submit the original importer copies of Ex-bond bills of entry and Chartered Accountant’s certificate on unjust enrichment. Accordingly, after due process of law, the adjudicating authority sanctioned the refund of Rs.7,12,70,639/- with respect to 67 refund claims filed between 29.05.2007 and 26.05.2013 on 30.9.2014. He, however, did not order payment of any interest.

Aggrieved by the non sanction of refund in the said adjudication order, the appellant filed appeal before Appellate Authority. However, the said appeal was rejected.

Conclusion- Held that in the impugned case after the finalization of the provisional assessment the appellant has filed refund claims under section 27 of CA 1962. Thus, respondent-importer cannot be permitted to take undue advantage of lapses on his part in not submitting complete document to enable the Revenue to finalize the assessment before ordering for refund of 1% EDD. Here, the proper officer found the appeal filed by the appellant defectives and issued a notice to reject the same. It’s only after considering the reply of the appellant that he sanctioned the monies due, well within 3 months of receipt of the final reply from the appellant. The order of the Hon’ble High Court found approval from the Hon’ble Supreme Court as stated above.

FULL TEXT OF THE CESTAT CHENNAI ORDER

The present appeal is against Order in Appeal No.01/2015 – TTN (CUS) dated 14.1.2015 passed by the Commissioner of Central Excise (Appeals – II), Trichy.

2. Brief facts of the case are that the appellants have filed 67 refund claims during the period from August 2013 to November 2013 for an amount of Rs.7,61,48,316/- being the excess duty paid as per the orders of finalization of provisional assessments. After finalization of the provisional assessment, the adjudicating authority issued Order in Original for each In-bond Bills of Entry on different dates, mentioning the refundable excess paid duty amount and that the appellants are eligible for the refund of that excess paid amount. In the meanwhile, the department directed the appellants vide letter dated 16.9.2013 to submit the original importer copies of Ex-bond bills of entry and Chartered Accountant’s certificate on unjust enrichment. Accordingly, after due process of law, the adjudicating authority sanctioned the refund of Rs.7,12,70,639/- with respect to 67 refund claims filed between 29.05.2007 and 26.05.2013 on 30.9.2014. He, however, did not order payment of any interest. Aggrieved by the non sanction of refund in the said adjudication order, the appellant filed appeal before the Ld. Appellate Authority. Vide the impugned order, the Ld. Appellate Authority rejected the appeal. Hence this appeal.

3. We have heard Shri Akshit Malhotra, learned counsel for the appellant and Smt. Anandalakshmi Ganeshram, Ld. Authorized Representative for the respondent-department.

3.1 The learned counsel for the appellant stated that Section 18 and Section 27 of the Customs Act, 1962 (CA 1962) are independent to one another and operate in different fields. Reading Section 18 along with Section 27 ibid. is totally untenable. Sub-section 18(2)(a) clearly provides for suo moto refund to the assessee if, on finalization of the assessments, it is found that the said assessee has paid duty in excess to what it was required to pay. Likewise, the said sub-section also entails suo moto liability upon the assessee in case the duty paid is found to be short paid on finalization. In consonance thereof, sub-section (3) and (4) provides for payment of interest on any short duty paid or on admissible refund, as the case maybe. Sub-section (4) thereof clearly stipulates that the relevant date for the purpose of computing such interest in the last date of the third month from the date of the order of final assessment. In other words, the interest liability is triggered on expiry of three months from the date of order of final assessment and is to be paid for the entire period till refund is paid at the rate specified under Section 27A. The settled position in law is that refunds are to be automatically sanctioned to an assessee under Section 18 ibid, hence no adverse inference ought to be drawn on account of its filing of the claims, in terms of the established practice. The Ld. Advocate relied upon the judgments in CC Vs Petronet LNG Ltd. reported in 2013 (291) ELT 420 (Tri-Ahmd) and Bharat Petroleum Corporation Ltd. Vs CC reported in MANU/CB/ 0054/2024. Without prejudice to the above, assuming without admitting that the provisions of Section 18 and the refund & interest accruing thereof are subject to the provisions of Section 27, still the impugned order is devoid of merits as the same has assumed that the last date of submission made by the Appellant is to be reckoned as the relevant date for computation of interest, when in law, it is clearly stipulated that it is the date of application. The impugned order, thus, deserves to be quashed and set aside and their refund claim allowed. 3.2 The Ld. Authorized Representative submitted that as per a plain reading section 27 of the CA 1962, it is clear that the refund application should be made in “the manner as may be prescribed …” that it shall be accompanied by such documentary or other evidence as referred to in Section 27 (1A) of the CA 1962. She provided a time chart of events which is reproduced below:

She stated that as per the time chart, which has not been contested by the appellant, the refund claim has been sanctioned within 3 months from date of receipt of the final reply from the appellant i.e. three months from the date of receipt of the complete claim / documents, thus there is no delay on the part of the department. As the claim was sanctioned within 03 months from the date of receipt of complete claim/documents, thus there is no delay on the part of the Department. Hence, the contention of the appellant is untenable. Section 18 of the CA 1962 merely entitles the appellant to get a refund if the duty finally determined is less than the duty paid provisionally. Moreover, the said section cannot be read in isolation. It has to be read with Section 27. The Ld. AR averred that section 18(2)(a) states that in the case of goods cleared for home consumption or exportation, the amount paid shall be adjusted against the duty finally assessed and if the amount so paid falls short of, or is in excess of the duty finally assessed, the importer or the exporter of the goods shall pay the deficiency or be entitled to a refund, as the case may be. Being entitled to a refund does not mean that the refund is payable to the assessee, they are required to apply for the same under section 27 of CA 1962. The claim may require verification of unjust enrichment etc. and hence the assessee though entitled for a refund is required to file a separate refund claim within the time limit stated under Section 27 of the CA 1962, so as to facilitate such verification. The Ld. AR relied on the judgment in the case of The Commissioner of Customs Mangaluru Vs M/s. JSW Steel Ltd cited in [2021 (10) TMI 189 Karnataka HC]. She prayed that the appeal may be ejected.

4. We have heard the contesting parties and have carefully gone through the Appeal Memorandum and the written submissions of the parties along with the ‘Convenience Compilation’ containing case laws and extracts of portions of the Act and Rules in force at the relevant time. We find that this is a case where provisional assessment has culminated in the refund of excess paid duty to the appellant, without payment of interest. The appellant is aggrieved about the non-sanction of interest on the alleged delayed payment of refund in terms of section 18 of CA 1962. Per contra revenue is of the opinion that the refund claim has been sanctioned on time as per section 27 of CA 1962 and no payment of refund of interest arises. Thus, the amount of refund sanctioned is not contested and the main issue relates to the determination of the relevant date for payment of interest, if any.

5. We find that this appeal deals with refund claims that pertain to provisionally assessed Bills of Entry, filed between 29.05.2007 and 26.05.2013. The Bills were subsequently finally assessed after hearing the appellants and 67 separate orders passed. Appellant, accordingly, have filed 67 claims from August 2013 to November 2013, depending upon the time when the final assessment orders were passed, seeking refund of the excess basic customs duty paid by them. As per the time chart submitted by the Ld. AR during the hearing, which has not been refuted by the appellant, refund claims were filed under Section 27 of CA 1962, during the period Aug. 2013 to Nov. 2013, subsequent to which a ‘deficiency memo’ came to be issued to the appellant on 16.9.2013. On receipt of reply to the memo, the department issued a Show Cause Notice datyed 27.12.2013. The SCN highlighted the following issues;

4. The importer/claimant have, vide their letter dated 05-11¬2013, submitted indemnity bonds in lieu of all the original bills of entry and a Chartered Accountant’s certificate dated 06-11-2013 on unjust enrichment.

5. According to Section 27(1A) of the Customs Act 1962, the refund application shall be accompanied by such documentary or other evidence (including the documents referred to in section 28(C)) as the applicant may furnish to establish that the amount of duty or interest in relation to which such refund is claimed was collected from, or paid by him and the incidence of such duty or interest, has not been passed on by him to any other person.

6. The original importer copy of bills of entry (for evidencing the amount of duty payable) and the original duty paid challan (for evidencing the payment of duty) are mandatory and must be submitted along with the refund application. But, in the subject claims, the importer/claimant has failed to submit the original bills of entry and duty paid challans/receipts. Indemnity Bond is acceptable only in rare situations where original documents could not be furnished. The reasons for not submitting the original documents – viz. (i) all the original duty-paid receipts are not in custody and (ii) triplicate copies of Bills of Entry are in custody as evidence of availment of CENVAT credit could not be accepted as a whole for all the sixty-seven claims. The importer also failed to produce any evidence with regards to CENVAT claim filed or availability of original Bills of Entry with them.

7. Besides, their Chartered Accountant, Shri H. Raman simply stated that the amount claimed is shown in the duty receivable account and the same has not been charged to any other person. He failed to detail – (i) whether the Books of Accounts and P & L Accounts for the period covering the subject imports have been verified by him and (ii) how the excess-duty have not been influenced the price structure of sold finished goods when the excess-duty was identified after one or two years from the duty payments. The certificate of the Chartered Accountant was not elaborating facts so as to conclude that the burden of ‘excess-paid duty amount’ has not been passed on by the importer/claimant and hence it could not be accepted. Moreover, the copies of audited Balance Sheets for the relevant periods were not submitted in support of the certificate.

8. Therefore, the Importer/Claimant was, vide this office show cause notice of even no. dated 27.12.2013, requested to show cause to the Assistant Commissioner of Customs (Refunds), Office of the Commissioner of Customs, Custom House, Tuticorin within 30 days from the date of receipt of that notice as to why the sixty-seven refund claims for Rs. 7,51,48, 316/- [as shown in para 1 above] should not be rejected for the reasons mentioned above.

The appellant submitted their final reply on 24.07.2014, which was followed by a Personal Hearing on 30.9.2014. The OIO came to be issued on the same date, accepting the appellants averments and sanctioning the refund claim. The question is as to when the time limit for interest would be triggered in such a situation.

6. We find that a similar issue came to be examined by the Hon’ble High Court of Karnataka, in the case of The Commissioner of Customs Mangaluru Vs M/s. JSW Steel Ltd [2021 (10) TMI 189 Karnataka HC / 2022 (379) E.L.T. 451 (Kar.)]. The relevant portion is cited below;

“The captioned appeal is filed by the Department assailing the impugned final order dated 20-9-2018 passed by the Customs, Excise and Service Tax Appellate Tribunal (for short “CESTAT”), South Zonal Bench, Bengaluru in No. 21384/2018.

2. This Court on 10-6-2019 has admitted the appeal on the following substantial questions of law :

“(1) Whether, in the facts and circumstances of the case, the CESTAT, is justified/correct in holding that the interest is payable in the said refund claim when the instant refund has been sanctioned within the prescribed period of three months from the receipt of all the requisite documents?

(2) Whether, the awarding of payment of interest by the CESTAT in the case is justified/correct in terms of Section 18(4) of the Customs Act, 1962 as the claimant needs to file the refund claim only after finalization of assessment as per the provisions of Section 27(1B)(c) read with Section 18(4) of the Customs Act, 1962 when there is failure on part of the claimant in complying the above provisions i.e., failure in filing refund claim after finalization of assessment?

(3) Whether, the CESTAT is justified in relying on the decision of the Apex Court in the case of M/s. Ranbaxy Laboratories Ltd.? In the case on hand, the duty e., 1% EDD was paid to get provisional release of goods and thereby resorting to provisional assessment and as such Section 18 and Section 27 of the Customs Act, 1962 will come into play and not Section 11B of the Central Excise Act, 1944. The facts involved in case of M/s. Ranbaxy Laboratories Ltd. indicated that the party has preferred claim under Section 11B of Central Excise Act, 1944 for rebate of duty?

(4) Whether the order of payment of interest by the CESTAT is justified/correct when the department has sanctioned the refund as per the direction of the Commissioner (Appeals) vide OIA No. 42/2017, dated 17-2-2017 within the period of three months from the date of receipt of relevant documents and as also in the circumstances wherein the said sanction has been upheld by the Commissioner (Appeals) vide OIA No. 213/2018, dated 30-5-2018 and interest claim of the importer already been rejected thereunder?”

3. The facts leading to the case are as under :

The respondent is a manufacturer of iron and steel products and had imported 12 consignments of coking coal/PCI coal/steam coal during the period from 6-5-2014 to 20-4-2015 from M/s. JSW International Tradecorp. Pvt. Ltd. The importer claimed refund of 1% of Extra Duty Deposit (for short “EDD”) paid after issue of Special Valuation Branch (for short “SVB”). However, the claim of the importer was rejected vide order dated 12-7-2016 on the ground that assessment was not finalized as contemplated under Section 18 of the Customs Act, 1962 (for short “Act, 1962”) and therefore, the authority was of the view that the claim of refund was premature.

4. Feeling aggrieved by the order of rejection of refund, the respondent-importer preferred an appeal. The Appellate Authority remitted the matter to the lower adjudicating authority. The refund sanctioning authority in OIO. No. 152/2018 after having recorded a finding that the assessment has been finalized, ordered for refund of EDD of Rs. 3,06,76,376/-, however rejected the respondent’s claim for interest on refund amount. The respondent being aggrieved by the denial of interest, preferred an appeal before the Appellate Authority and the Appellate Authority by an order dated 30-5-2018 dismissed the appeal. The Appellate Authority was of the view that the importer while seeking refund had not annexed all statutory required documents. The Appellate Authority was of the view that the requisite documents were submitted only on 11-10-2017 and the refund was sanctioned on 2-1-2018 which is well within the period of three months from the date of filing of the last document and therefore, respondent-importer is not entitled for interest on the refund.

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10. The respondent-importer is seeking refund with interest on the ground that the Department has failed to finalize the assessment immediately and therefore, are liable to pay interest in terms of Section 27A of the Act, 1962 for the delay in refund of EDD. On meticulous examination of the order passed by the Original Authority as per Annexure-C, we would find that respondent-importer had not produced all required documents and this compelled the Department to issue a show cause notice on 7-7-2017 notifying the importer that the claim of refund will be rejected for non-submission of the documents. Pursuant to the show cause notice, the importer has furnished 11 duplicate copies of bills of entries and four original copies of capital TR-6 challans. We would find that the importer has produced these documents duly certified by Chartered Accountant only on 11-10-2017. The Department has sanctioned refund only after due verification of documents.

11. The importer preferred an appeal before the Appellate Authority questioning the order passed by the Original Authority. The Appellate Authority having verified the documents and also having given its due consideration to the reasons assigned by the Original Authority concurred and affirmed the reasons assigned by the Original Authority. The Appellate Authority was also of the view that the refund is sanctioned well within the time of three months from the date of receipt of last document from the importer and therefore, question of awarding interest will not arise.

12. On perusal of the order passed by the CESTAT however, we would find that the Tribunal has placed reliance on the judgments of the Apex Court and by plainly relying on the judgments has come to the conclusion that if the amount is not refunded within three months from the date of application, the department is bound to pay interest in terms of Section 27A of the Act, 1962. On meticulous examination of the reasons and conclusions arrived at by the Tribunal, we would find that the Tribunal has not examined the findings arrived at by the Original Authority as well as the Appellate Authority. In fact, we would find that the Tribunal has not at all a recorded finding indicating that the order passed by the original authority as well as the Appellate Authority suffers from perversity. We would find that the Tribunal has not even discussed the facts of the present case on hand. What emerges from the order passed by the Tribunal is that it has proceeded to order for payment of interest on the ground that the application is not decided within a period of three months.

13. From the records, we would find that the original refund application was filed on 22-4-2016 which was rejected vide order dated 12-7-2016 on the ground that it was premature as the bills of entry were provisionally assessed and were yet to be finalized. It can also be gathered from the records that the importer had not enclosed all relevant documents until a show cause notice was issued by the Department which is dated 7-7-2017. It is only after receipt of documents which was submitted on 11-10-2017, the refund has been sanctioned by the Department which is well within the prescribed time limit of three months from the date of receipt of relevant documents. The Appellate Authority has concurred with the reasons assigned by the Original Authority. Therefore, the contention of the respondent-importer that even if the application was defective, the same at the most may amount irregularity and hence, the Department cannot escape the liability of paying interest in terms of Section 27A of the Act, 1962 is too far stretched and we are unable to accede to such a contention. The respondent-importer cannot be permitted to take undue advantage of lapses on his part in not submitting complete document to enable the Revenue to finalize the assessment before ordering for refund of 1% EDD. All these significant details are not dealt by the Tribunal and therefore, the order dated 20-9-2018 passed by the Tribunal is illegal and the Tribunal has erred in holding that interest is payable on the said refund claim.

14. Accordingly, the substantial questions of law formulated in the present appeal are answered in affirmative e., in favour of the Revenue and against the assessee.

15. For the foregoing reasons, we pass the following :

ORDER

16. The appeal is allowed. The impugned final order dated 20-9¬2018 passed by the CESTAT in No. 21384/2018 is set aside. (emphasis added)

We find that the order of the Hon’ble High Court found approval from the Hon’ble Supreme Court [JSW STEEL LTD. Vs COMMISSIONER OF CUSTOMS – 2022 (381) E.L.T. 443 (S.C.)]. The order is reproduced below;

2. In the facts and circumstances of the case and considering the fact that from the date of submission of relevant documents as demanded by the show cause notice dated 7-7-2017 and thereafter, the refund was allowed within a period of three months, the High Court has rightly held that the appellant shall not be entitled to the interest on the refund as claimed by the appellant.

3. In the facts and circumstances of the case, we see no reason to interfere with the impugned judgment and order passed by the High Court [2022 (379) E.L.T. 451 (Kar.)].

4. The appeal stands dismissed. (emphasis added)

7. We find that the judgment of the Hon’ble High Court of Karnataka is based on similar facts. In the impugned case also after the finalization of the provisional assessment the appellant has filed refund claims under section 27 of CA 1962. The Hon’ble High Court held that the respondent-importer cannot be permitted to take undue advantage of lapses on his part in not submitting complete document to enable the Revenue to finalize the assessment before ordering for refund of 1% EDD. Similarly in this case the proper officer found the appeal filed by the appellant defectives and issued a notice to reject the same. It’s only after considering the reply of the appellant that he sanctioned the monies due, well within 3 months of receipt of the final reply from the appellant. The order of the Hon’ble High Court found approval from the Hon’ble Supreme Court as stated above.

8. A decision of a High Court which has the approval of the Hon’ble Supreme Court has binding force and over rides the judgments of the Tribunal cited by the appellant. Judicial discipline requires that we follow the same. Hence for the reasons discussed, we reject the appeal and uphold the impugned order. The appeal is disposed of accordingly.

(Order pronounced in open court on 20.06.2025)