Case Law Details
Elite Green Pvt Ltd Vs Under Secretary (Customs-III/VI) (Kerala High Court)
In a significant ruling, the Kerala High Court has directed the Customs Authorities to process the refund claim of 4% Special Additional Duty (SAD) filed by Elite Green Pvt Ltd. This decision comes in light of the annulment of Circular No.18/2013-Cus by the Delhi High Court, which had imposed additional restrictions on the refund of SAD. The judgment emphasizes the recognition of DEPB scrips as valid payment for SAD and underscores the importance of adhering to the original conditions stipulated in Notification No.102/2007-Cus.
Background of the Case
Elite Green Pvt Ltd, a leading food processing unit in India, engaged in the export of processed food, imports raw materials to meet its export obligations. The company utilized DEPB scrips, obtained as export incentives, to pay the basic customs duty and 4% SAD on imported goods. According to Notification No.102/2007-Cus, importers are entitled to a refund of the SAD paid upon providing proof of value-added tax (VAT) payment.
However, Circular No.18/2013-Cus, issued on April 29, 2013, altered the procedure for claiming SAD refunds. The circular mandated that the 4% SAD refund would only be available if the initial payment was made in cash, not through DEPB scrips. This led to the Customs Authorities rejecting the refund claim of Elite Green Pvt Ltd, prompting the company to file a writ petition.
Single Judge’s Decision
The learned Single Judge dismissed the writ petition, stating that the appellant’s ignorance of the new circular could not be accepted. The judge further reasoned that despite the initial payment being accepted by the Customs Authorities, the claim for refund could not be processed under the new circular’s terms.
Appeal and Arguments
Elite Green Pvt Ltd appealed against the Single Judge’s decision. The appellant’s counsel, Sri. Baby M.A, argued that the 4% SAD was indeed paid at the time of import, as recognized by the Customs Authorities, albeit through DEPB scrips. The counsel contended that the conditions for refund as per Notification No.102/2007-Cus were satisfied, and the additional restrictions imposed by Circular No.18/2013-Cus were unjustified, especially since the Delhi High Court had already annulled the circular in Allen Diesels India Pvt. Ltd v. Union of India.
Kerala High Court’s Judgment
The Kerala High Court found merit in the appellant’s arguments. The court noted that the payment of 4% SAD through DEPB scrips was accepted by the Customs Authorities at the time of import, fulfilling the appellant’s liability under the Customs Act and Rules. Given this, the court held that the respondents could not deny the refund merely because the payment method involved DEPB scrips.
The court emphasized that once the Delhi High Court annulled Circular No.18/2013-Cus, the Customs Authorities were legally obliged to consider refund applications independently, based on the merits and conditions specified in Notification No.102/2007-Cus. Consequently, the Kerala High Court directed the Customs Authorities to process the refund claim of Elite Green Pvt Ltd within one month from the date of receipt of the judgment, after providing an opportunity for a hearing.
Conclusion
The Kerala High Court’s ruling in the case of Elite Green Pvt Ltd vs. Under Secretary (Customs-III/VI) reaffirms the principle that statutory notifications and their conditions must be adhered to, without being overridden by subsequent circulars imposing additional restrictions. By recognizing DEPB scrips as valid payment for 4% SAD and directing the Customs Authorities to process the refund claim, the judgment provides significant relief to importers who utilize export promotion schemes.
FULL TEXT OF THE JUDGMENT/ORDER OF KERALA HIGH COURT
The petitioner in WP(C). No.7262 of 2016 is the appellant herein aggrieved by the judgment dated 25.07.2023 of the learned Single Judge in the Writ Petition.
2. Briefly stated the facts necessary for the disposal of this Writ Appeal are as follows:-
The appellant is stated to be a leading food processing unit in India and is engaged in the export of processed food. In connection with its business activities, it procures raw materials locally to process the food items for export. On certain occasions, raw materials are also imported for the purposes of meeting its export obligations.
3. It is the case of the appellant that while importing goods it used to pay the basic customs duty and special additional duty of customs, by debiting the duty amounts in the Duty Entitlement Pass Book (DEPB) scrips that were obtained by it as export incentives under the DEPB export promotion scheme. Thereafter, whenever a duty exemption was claimed, the same would be made available to the exporters either by way of re-crediting the scrips with the refund amount or by paying the refund amount in cash to them. In the instant case, the appellant had paid the 4% Special Additional Duty (for short, ‘SAD’) by debiting the DEPB Scrips. However, while claiming a refund of the SAD paid, by adducing proof of payment of value added tax, in accordance with Notification No.102/2007-Cus dated 14.09.2007, which envisaged an exemption from, and consequent refund of, the SAD paid, to importers, it came across a Circular No.18/2013-Cus dated 29.04.2013 that changed the procedure for claiming refund of SAD. As per the said Circular, the refund of 4% SAD would be available to importers only if they had made the initial payment of 4% SAD in cash instead of through debiting the DEPB scrips. It was on account of the reluctance shown by the customs authorities in processing the refund claims preferred by the appellant, that he approached the writ court through the Writ Petition aforementioned seeking a direction to the Customs Authorities to process its refund claim for 4% SAD notwithstanding the fact that the initial payment of SAD was through a debit of the DEPB scrips.
4. The learned Single Judge, who considered the matter found that the contention of the appellant that he was not aware of the new Circular issued by the Director General of Foreign Trade (for short, DGFT’) could not be countenanced, and further that his contention that so long as the Customs Authorities did not deny the initial payment of 4% SAD by the appellant, they could not deny him the refund, once the conditions for refund had been satisfied in terms of Notification/Circular No.18/2013-Cus dated 29.04.2013, could not be accepted. He therefore dismissed the Writ Petition after finding that the claim for refund preferred by the appellant could not be processed.
5. Before us, it is the submission of Sri. Baby M.A, the learned counsel for the appellant that the learned Single Judge erred in not considering the fact that the appellant had actually paid the 4% SAD at the time of import, albeit by debiting the DEPB scrips, and that this payment was in fact accepted by the Customs Authority as being in due discharge of its liabilities under the Customs Act and Rules. It is contended, therefore, that on the appellant satisfying the condition for refund of SAD as envisaged under Notification No.102/2007-Cus dated 14.09.2007 the respondents could not have denied the appellant the benefit of refund by relying on the Circular No.18/2013-Cus dated 29.04.2013. He relies on the decision of the Delhi High Court in Allen Diesels India Pvt. Ltd v. Union of India [2016 (334) E.L.T. 624 (Del.)], which struck down the aforesaid Circular dated 29.04.2013 by holding that the Central Board of Excise and Customs could not have imposed additional restrictions for availing the exemption in terms of Notification No.102/2007-Cus dated 14.09.2007 issued under Section 25(1) of the Customs Act, 1962. He also places reliance on the judgment dated 07.07.2023 of a learned Single Judge of this Court in WP(C).No1845 of 2016 that follows the judgment of the Delhi High Court cited above and directs the Customs Authorities to reconsider the refund application preferred by an exporter who is similarly placed as the appellant herein.
6. Per contra, it is the submission of Smt. Krishna, the learned Standing counsel for respondents 1 and 2 that the case of the appellant before the learned Single Judge was only that he was not aware of the Circular issued by the Central Board of Excise and Customs, and therefore, the judgment of the learned Single Judge, which repelled his contentions based on the said argument did not merit any interference.
7. We have considered the rival submissions and we find force in the submission of the learned counsel for the appellant with regard to the entitlement of the appellant for the refund aforementioned. While it may be a fact that, based on the subsequent Circular issued by the Central Board of Excise and Customs (which has since been annulled by the Delhi High Court in the decision in Allen Diesels India Pvt. Ltd (Supra)), the appellant did not satisfy a pre-condition for claiming refund, the fact remains that the payment of 4% SAD effected by the appellant at the time of import of the goods, albeit by debiting the DEPB scrips, was accepted by the Customs Authorities, who recognised the said payment as in the discharge of the appellant’s liability in respect of the import duties at the time of import of the goods. If that be the case, then notwithstanding the Circular dated 29.04.2013 aforementioned, the respondents cannot take a stand that there was no “payment” of the 4% SAD by the appellant at the time of import of the goods. It follows as a consequence that if the appellant satisfies the conditions in Notification No.102/2007-Cus dated 14.09.2007 for the purposes of refund of the said 4% SAD, then merely because the facility of re-crediting the DEPB scrips has been taken away, the refund that the appellant is entitled to by virtue of the notification aforementioned cannot be denied. At any rate, since the Delhi High Court has already annulled the Circular dated 29.04.2013, the respondents are now legally obliged to consider the refund application preferred by the appellant independently, on its merits, to see whether the conditions specified in Notification 102/2007-Cus dated 14.09.2007 have been satisfied by the appellant. We, therefore, allow the Writ Appeal by setting aside the impugned judgment of the learned Single Judge and by directing the respondents to process the application for refund preferred by the appellant within a period of one month from the date of receipt of a copy of this judgment, after hearing the appellant.
The Writ Appeal is allowed as above.
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