Payment of duty under protest tantamount to challenging assessment & therefore refundable

Fairway Trading Company Pvt. Ltd. (Assessee) filed a shipping bill dated July 31, 2007 for export of 15,700 MTs of Iron Ore Fines in low grade to China. They declared the percentage of iron as 58.5%, thereby the rate of duty applicable was Rs. 50/- per MT. But the Assessee paid duty at Rs. 300/- per MT as per the directions of the Revenue to ensure that the consignment leaves India. Thus, the payment of duty was made under pressure.

Later, the Assessee filed refund of the duty paid. The Revenue contended that the Assessee did not challenge the assessment, therefore refund claim could not be filed.

However, the Adjudicating Authority as well as Commissioner (Appeals) sanctioned the refund. Being aggrieved, the Revenue filed an appeal before the Hon’ble CESTAT, Bangalore.

The Hon’ble CESTAT, Bangalore upheld the order of the Commissioner (Appeals) and held that since there is no procedure prescribed for payment under protest in Customs law, the letter written by the Assessee stating that they have been compelled to pay higher duty by the Customs tantamount to payment under protest. Once the payment is made under protest, it means assessment also has been challenged. In such cases, either an assessment order confirming the original assessment has to be issued or the refund claim has to be considered.

It was further held that the officers of Customs are also required to follow the law and the refusal to collect correct rate of duty, compelling the Assessee to pay higher duty itself was wrong. The correct procedure would have been to resort to provisional assessment in which case, the Assessee would not have paid higher duty at all.

Thus, the Hon’ble Tribunal rejected the appeal filled by the Revenue and sanctioned the refund.