Case Law Details
Gold Quest International Pvt. Ltd. Vs Commissioner of Customs (CESTAT Chennai)
Introduction: The Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) Chennai has delivered a pivotal judgment concerning the period of limitation for refund claims under Section 27(1B) of the Customs Act, 1962. The case in question, Gold Quest International Pvt. Ltd. Vs Commissioner of Customs, revolves around the appellant’s refund claim for import duty paid under protest, invoking critical analysis of legal provisions and precedents.
Detailed Analysis: The crux of the dispute hinged on whether the appellant’s refund application for a differential duty amount of Rs.25,27,89,159/-, filed nearly 20 months post a CESTAT order, was barred by limitation despite the duty being paid under protest. The Tribunal’s examination focused on interpreting the interplay between Section 27(1B) and the scenario of duty payment under protest, which traditionally exempts claims from the standard limitation period.
The Tribunal meticulously reviewed the case’s facts, legal arguments presented, and relevant legal provisions, including Section 27 of the Customs Act, 1962. The appellant argued that the protest payment exempts the refund claim from limitation constraints, a stance supported by various legal precedents suggesting that the act of filing an appeal or registering a protest negates the limitation period for refund claims.
However, the Revenue’s counter-argument highlighted that all refund claims under the Customs Act are governed by Section 27, emphasizing the Supreme Court’s judgment in Mafatlal Industries Ltd. Vs Union of India, which mandates adherence to the statutory limitation period.
Upon deliberation, the Tribunal elucidated that payment under protest and the filing of a consequential appeal set the stage for legal scrutiny. It determined that the protest ceases to have effect once a matter attains finality through a judicial order, thereby activating the limitation period prescribed under Section 27(1B)(b) for filing refund claims. The Tribunal further referenced judgements that aligned with this interpretation, underscoring the doctrine of merger and the cessation of protest upon final adjudication.
Conclusion: The CESTAT Chennai’s decision underscores the nuanced application of the Customs Act’s provisions concerning refund claims for duty paid under protest. It clarifies that while the initial act of paying duty under protest does indeed protect the payer from immediate limitation constraints, the protection ceases once a judicial order resolves the matter, reinstating the limitation period for refund claims as prescribed under Section 27(1B)(b). This ruling not only aligns with established legal principles but also provides a clear directive for importers and legal practitioners navigating refund claims under similar circumstances.
FULL TEXT OF THE CESTAT CHENNAI ORDER
This appeal is filed by the appellant against Order-in-Appeal Air Cargo Cus. I No.215/2019 dated 30.9.2019 passed by the Commissioner of Customs (Appeals – I), Chennai. (impugned order). The main issue that arises for resolution is whether the refund claim filed on the basis of CESTAT order dated 04/11/2013 is hit by the limitation of time in spite of the importer having registered a ‘Protest’ at the time of paying a deposit towards duty prior to adjudication.
2. Before proceeding further, it is essential to recapitulate the facts. Pursuant to Tribunal’s Final Order No. 40506 to 40510/2013 dated 4.11.2013, the appellant herein, filed refund application dated 08/07/2015 for differential duty amount of Rs.25,27,89,159/- i.e. nearly 20 months after the date of the Tribunal final order. The amount was initially paid by the importer M/s. ICICI Bank ‘under protest’ vide letter dated 16-Jun-2008 on behalf of the appellant (buyer) towards ‘gold and silver medallions’ imported vide bill of entry dt. 03-Jul-2007. After due process of law, the original authority rejected the refund claim on the ground of time-bar and on the ground of unjust enrichment. In appeal, the Commissioner (Appeals) upheld the adjudication order and rejected the appeal of the appellant on the ground of time bar. Hence the appellant is now before the Tribunal.
3. The learned Counsel Shri P.R. Renganath appeared for the appellant and learned Smt. Anandalakshmi Ganeshram, AC (AR) appeared for the Revenue.
3.1 The learned counsel for the appellant after recapitulating the facts in issue, stated that it is well settled that where duty has been remitted under protest, limitation does not apply, as held in a number of cases. This is on the basis, inter alia, that, section 27(1B) which mentions a limitation of one year from the date of a court/tribunal order for filing a refund claim, is excluded by the second proviso to section 27(1) which stipulates that the one-year period would not apply where duty has been paid under protest. He stated that once this Hon’ble Tribunal sets aside an order, the directions in the said order are also set aside and the position prior to passing of such an order is restored. Further the amount paid is merely a sum deposited, hence not subject to unjust enrichment (UJE) and the provisions of section 27 are not attracted. They have also submitted a Chartered Accountant’s certificate that the incidence of duty had not been passed to any person. He therefore prayed that the impugned order be set aside and the Asst Commissioner directed to refund the amount with applicable interest.
3.2 The Learned AC (AR) stated on behalf of Revenue that all refunds under the Customs Act 1962 are strictly governed by Section 27 of the Act as stated in the Supreme Court judgment in Mafatlal Industries Ltd. Vs Union of India [1997 (89) E.L.T. 247 (S.C.)] and cited in the impugned order. Section 27(1B) mentions a limitation of one year from the date of a court/ tribunal order for filing a refund claim. The appellant has filed a claim after 20 months of the CESTAT order and hence were not eligible for refund. She prayed that the impugned order may be upheld.
4. We have carefully gone through the appeals and the submissions made by the rival parties. The main issue that arises for resolution is whether the refund claim filed on the basis of CESTAT order dated 04/11/2013 is hit by limitation of time in spite of the importer having registered a ‘Protest’ at the time of making a deposit towards duty prior to adjudication. We find that since no further appeal has been filed against the said CESTAT order the same has attained finality.
5. Section 27 of the Customs Act 1962 as it stands amended after 08.04.2011 which is relevant for understanding the issue is reproduced below:
“SECTION 27 Claim for refund of duty.-
1[(1) Any person claiming refund of any duty or interest,-
(a) paid by him; or
(b) borne by him,
may make an application in such form and manner as may be prescribed for such refund to the Assistant Commissioner of Customs or Deputy Commissioner of Customs, before the expiry of one year, from the date of payment of such duty or interest:
Provided that where an application for refund has been made before the date on which the Finance Bill, 2011 receives the assent of the president, such application shall be deemed to have been made under sub-section (1), as it stood before the date on which the Finance Bill, 2011 receives the assent of the President and the same shall be dealt with in accordance with the provisions of sub-section (2):
Provided further that the limitation of one year shall not apply where any duty or interest has been paid under protest.
Provided also that where the amount of refund claimed is less than rupees one hundred, the same shall not be refunded.
Explanation.- For the purposes of this sub-section, “the date of payment of duty or interest” in relation to a person, other than the importer, shall be construed as “the date of purchase of goods” by such person.
(1A) The application under sub-section (1) shall be accompanied by such documentary or other evidence (including the documents referred to in section 28C) 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.
(1B) Save as otherwise provided in this section, the period of limitation of one year shall be computed in the following manner, namely:-
(1C) in the case of goods which are exempt from payment of duty by a special order issued under sub-section (2) of section 25, the limitation of one year shall be computed from the date of issue of such order;
(1D) where the duty becomes refundable as a consequence of any judgment, decree, order or direction of the appellate authority, Appellate Tribunal or any court, the limitation of one year shall be computed from the date of such judgment, decree, order or direction;”
6. The Constitution Bench decision of the Supreme Court in the case of Mafatlal Industries Ltd. (supra), at para 83 states that where a person proposes to contest his liability by way of appeal, revision or in the higher courts, he would naturally pay the duty, whenever he does, under protest. It is difficult to imagine that a manufacturer would pay the duty without protest even when he contests the levy of duty, its rate, classification or any other aspect. It has hence come to stay as declared by the Hon’ble Supreme Court that apart from any prescribed procedure like say by Rule 233B of Central Excise Rules, 1944, the filing of an appeal against an order is to be construed as payment of duty under protest.
7. The Appellant has drawn our attention to a few judgments two of which deal with the subject under discussion. Final Order No. 40356 / 2022, dated 09.11.2022 in the case of M/s. Sai Exports Vs The Commissioner of Customs, Chennai, by a learned Single Member of this Tribunal and the Hon’ble Punjab and Haryana High Court’s judgment in Malwa Industries Ltd Vs Union of India [2018 (316) ELT 81 (P&H)].
8. In Sai Exports (supra) it was held that the second proviso of subsection (1) of Section 27 states that the limitation of one year will not apply when duty is paid under protest. The question is whether sub- section (1B) of Section 27 which states that the limitation of one year has to be computed from the date of judgment, decree or order of court would come into application even if the duty is paid under protest. Sub-section (1B) starts with the phrase ‘save as otherwise provided in this section’. The order cited the Hon’ble Andhra Pradesh High Court judgement in the case of Cherukuri Kutumbayya Vs The Municipal Council [AIR 1959 AP 1], which held as under;
“5. The point for determination is whether the appropriate provision of law is Section 81(2) or 81(4). The answer to this must depend upon the construction we put on Section 81(2) and (4). Section 81(2) enacts:
“Save as otherwise provided in this Act, these taxes shall be levied at such percentages of the annual value of lands or buildings or both as may be fixed by the Municipal Council, subject to the provisions of Section 78.”
Section 81(4) is in these words:
“The Municipal Council may, in the case of lands used exclusively for agricultural purposes, levy these taxes at such proportions as it may fix of the annual value of such lands as calculated in accordance with the provisions of Section 79 of the Madras Local Boards Act, 1920.”
6. The expression “save as otherwise provided” in Sub-section (2) means ‘except to the extent specific provision is made’. In other words, Sub-section (2) will come into play only in cases which are not governed by any other specific provisions of law. Therefore, it is only where there is no other special provision in respect to any other typeof land this sub-section is attracted. Since the Legislature has enacted a specific provision in regard to agricultural lands, it is reasonable to infer that that category of lands contemplated by that sub-section should be governed by it.
(emphasis applied)
The learned Member hence concluded, it is clear from the above, that only in cases except as provided in Section 27, the newly added subsection (1B) would apply. In other words, except for which has been provided in the section, the limitation of one year has to be computed from the date on which the judgment, decree or order of court has been passed. Thus, the operation of sub-section (1B) will not come into application when the duty is paid under protest. In Malwa Industries Ltd (supra) the Hon’ble High Court took note of the opening phrase ‘save as otherwise provided in this section’ to hold that under section 27 of the Customs Act, sub-section (1B) is subject to the second proviso to sub-section (1).
9. We find that an assessee can be pay duty ‘under protest’ by either filing a letter of protest as provided by the Rules or by filing an appeal against the order on the basis of which the duty has been deposited or by taking both the actions. Consequent to a letter of protest being filed the matter would come up for a decision before the appropriate forum and an order passed which automatically vacates the protest, whether the decision is in favour or against the assessee. If the order is in favour of the assessee he can file a refund claim within the statutory time period as per section 27 (1B) (b) of the Customs Act or if it goes against him he may file a further appeal against the said order as provided in law till the matter attains finality.
10. An order passed finalizing the lis which vacates the protest and a letter of protest / protest cannot co-exist. There cannot be more than one legal position which are contradictory in nature on the same issue at a given point of time, more so when the protest is vacated by way of an order. The words ‘save as otherwise provided in this section’ appearing in section 27(1B) would apply to the second proviso when the ‘protest’ is valid and subsisting. When the protest is vacated, it no longer survives and section 27(1B) has to be read accordingly.
11. Once a matter is decided in a manner recognized by law, it has binding force, even if the order passed is felt to be not legal and proper by the either of the rival parties. A seven judge Bench of the Hon’ble Supreme Court in Ujjam Bai v. State of Uttar Pradesh, [(1961) 1 SCR 778] held as under:
‘A taxing authority, which has the power to make a decision on matters falling within the purview of the law under which it is functioning is undoubtedly under an obligation to arrive at a right decision. But the liability of a tribunal to err is an accepted phenomenon. The binding force of a decision which is arrived at by a taxing authority acting within the limits of the jurisdiction conferred upon it by law cannot be made dependent upon the question whether its decision is correct or erroneous. For, that would create an impossible situation. Therefore, though erroneous, its decision must bind the assessee.’
12. After an order is passed it either attains finality or can be taken up in further appeal as provided for in law. The doctrine of merger which is a common law doctrine recognized by Courts on principles of propriety in the hierarchy of the justice delivery system protects the assessee’s claim for refund as per section 27(1B)(b) ibid, once the protest is vacated. The doctrine implies that the order passed by a lower authority would lose its finality and efficacy in favour of an order passed by a higher authority before whom correctness of such an order may have been assailed in appeal or revision. Hence once an order is passed in a matter where a protest is vacated by the issue of an order by the proper officer the second proviso to section 27(1) ceases to apply and section 27(1B)(b) takes over.
13. Since the filing of the initial appeal itself means the registration of a ‘protest’, holding that the ‘protest’ would survive for perpetuity till the concerned person seeks to enforce his right, cannot be the interpretation of section 27. Such an interpretation would render section 27(1B) (b) otiose. In High Court of Gujarat and another Vs Gujarat Kishan Mazdoor Panchayat and others [(2003) 4 SCC 712] the Apex Court held as under;
“35. The Court while interpreting the provision of a statute, although, is not entitled to rewrite the statute itself, is not debarred from “ironing out the creases”. The court should always make an attempt to uphold the rules and interpret the same in such a manner which would make it workable.
36. It is also a well-settled principle of law that an attempt should be made to give effect to each and every word employed in a statute and such interpretation which would render a particular provision redundant or otiose should be avoided.”
14. The Hon’ble Supreme Court in Dena Snuff (P) Ltd. v. CCE [2003 (157) ELT 500 SC] after considering the Hon’ble Supreme Court’s judgment in the case of Mafatlal Industries Ltd. v. Union of India [(1997) 5 SCC 536] held that when duty is paid under protest, the period of limitation would start to run from date of final decision in the assessee’s own case. It held;
“5. As far as the first submission is concerned, we are of the view that the Tribunal’s appreciation of the relevant paragraph in Mafatlal Industries (supra) was correct. The “cause of action” of the appellant would arise only after the final dispute regarding the classification list had been settled by this Court. . . . . . . We have noted the proviso to sub-section (1) of Section 11(B) which says that the period of limitation of one year prescribed under sub-section (1) will not apply in case duties are paid under protest. The question then is from which date will the period of limitation start to run? It appears on the basis of the paragraph of Mafatlal Industries decision which has been relied upon by the Tribunal it would have to be from the final decision in the assessee’s own case.
15. In the impugned case the matter reached a finality after the Tribunal’s Final Order No. 40506 to 40510/2013 dated 04.11.2013 came to be accepted by the rival sides and was not further appealed against. Hence the matter has become final. The protest which stood vacated by an order of the lower authority is of no consequence to the limitation of time at this point of time as the order has merged with that of the superior authority i.e. the order of the Tribunal. The appellant filed the impugned refund claim dated 08/07/2015 i.e. after a delay of about 20 months from the date of the order. Hence even, though the payment of duty by the importer was initially made under protest, the refund claim is clearly time barred in terms of Section 27(1B)(b) of the Customs Act, 1962.
16. We find that a similar matter came in for consideration before a coordinate Bench of this Tribunal in M/s Redington India Ltd Vs Commissioner Of Customs, Chennai [2011-TIOL-863-CESTAT-MAD / dated 18.3.2011]. The facts of the case were similar in that the appellant in that case had paid the import duty ‘under protest’. The dispute of the assessment was finally decided by the lower appellate authority on 24.05.2007 and the appellants became entitled for consequential relief of refund of duty paid. The appellants filed refund claim on 21.2.2008, i.e., nearly nine months from the date of the order of the lower appellate authority. The lower authorities rejected the claim on the ground of time bar as the claim was not filed within six months as stipulated under Section 27 (1) of the Customs Act, 1962. The appellants argued that in respect of amounts paid under protest, the time limit prescribed under Section 27(1) of the Customs Act, 1962 does not apply and hence the authorities below have wrongly rejected the refund claims of the appellants as time-barred. The Tribunal held:
“7. In this case, the protest was lodged by the appellants challenging the assessment made by the Department and claiming nil rate of duty. The dispute in assessment came to a finality once the matter was decided in favour of the appellants by the lower appellate authority and the department chose not to file any further appeal against the same. Once the very cause of the protest came to an end by the resolution of the assessment dispute at the hands of the lower appellate authority, it cannot be held that the protest would survive beyond the date of the order passed by the lower appellate authority in favour of the appellants. Thereafter, it was the duty of the appellants to take steps to file necessary refund claims within the time limit prescribed. As noted above, the fourth proviso prescribing limitation of six months from the date of a judgment / order of the appellate authority was introduced in the law on 11.5.2007 and the order of the lower appellate authority finalizing the assessment dispute was passed on 24.5.2007. Clearly after the fourth proviso came into operation, the appellants had only six months time from 24.5.2007 to file a refund claim. Having not done so, the refund claim has become time-barred and therefore in terms of the legal provision, the same cannot be held to be admissible. As such, the orders passed by the authorities below rejecting the refund claim do not require any interference. The appeal of the appellants is dismissed.
17. In the light of the judgments of the Hon’ble Supreme Court in Dena Snuff (P) Ltd. and of the Coordinate bench decision in M/s Redington India Ltd both cited above, which cover the legal issue, judicial discipline requires that we follow the same. Accordingly, we find that the lower authority has taken a view which is reasonable, legal and proper and we find ourselves in agreement with it. The impugned order merits to be upheld.
18. We hence reject the appeal and uphold the impugned order. The appeal is disposed off accordingly.
(Pronounced in open court on 05.02.2024)
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