Case Law Details
Commissioner of Customs (Port) Vs New Way Vyapaar Private Limited (CESTAT Kolkata)
Introduction: The recent CESTAT Kolkata order in the case of Commissioner of Customs (Port) Vs New Way Vyapaar Private Limited addresses the rejection of a refund claim for customs duty paid through DEPB Scrip. This article provides an in-depth analysis of the order and the legal precedents supporting the refund claim.
Detailed Analysis:
1. Background and Key Issues:
- New Way Vyapaar Private Limited imported Sulphuric Acid Brown and cleared it for home consumption by paying customs duty, including SAD @ 4%.
- The duty was paid using DEPB license and cash proportionately, with a claim for SAD refund filed.
- A portion of the refund claim was sanctioned, but the remaining amount was rejected.
2. Legal Precedents and Circulars:
- The issue of refund for duty paid through DEPB Scrip was examined by the Hon’ble Delhi High Court in the case of Allen Diesels India Private Limited Vs. Union of India.
- Circulars issued by the C.B.E. & C. were discussed, clarifying the manner of refund and re-crediting of DEPB scrips.
3. CESTAT Order and Judicial Position:
- The Commissioner (Appeals) allowed the refund claim filed by New Way Vyapaar Private Limited.
- The CESTAT order upholds the Commissioner (Appeals) decision, citing the legal position established by the Hon’ble Delhi High Court and the Tribunal.
- The order emphasizes that circulars imposing additional restrictions for refund are ultra vires of the Act and cannot be legally sustained.
- The Tribunal, relying on past decisions, rejects the Revenue’s arguments against refunding duty paid through DEPB Scrip.
4. Impact of Legal Pronouncements:
- The Hon’ble Delhi High Court and various Tribunal decisions have consistently held that circulars cannot impose additional restrictions for availing exemptions under notifications.
- The circulars challenging the refund claim based on the mode of payment (DEPB Scrip) were declared invalid, ensuring importers and exporters are entitled to the refund as per the notification conditions.
Conclusion: The CESTAT Kolkata order in Commissioner of Customs (Port) Vs New Way Vyapaar Private Limited reinforces the legal position that refund claims for customs duty paid through DEPB Scrip are valid. The order aligns with past judicial pronouncements, providing clarity on the issue and upholding the rights of importers and exporters. This analysis highlights the significance of adhering to notification conditions and challenges circulars imposing additional restrictions.
FULL TEXT OF THE CESTAT KOLKATA ORDER
The Revenue is in appeal against the impugned order.
2. The facts of the case are that the respondent imported Sulphuric Acid Brown in bulk and cleared the same for home consumption by paying Customs duty including SAD @ 4%. The duty was paid by DEPB license and cash proportionately. The duty paid towards SAD works out 3,31,931.77. The respondent filed a claim for refund of SAD to the tune of Rs.3,30,837.28 in terms of Notification No. 102/2007-Cus dated 14.09.2007 along with all relevant documents. The refund claim to the tune of Rs.98071/- was sanctioned , which is the proportionate SAD amount paid in cash, but the remaining claim was rejected.
2.1 Against the said order, the respondent filed the appeal before the Commissioner (Appeals), who allowed the refund claim of duty paid by way of DEPB scrips.
2.2 Against the said order, the Revenue is before us.
3. Heard the A.R. for the Revenue.
4. We find that the said issue came up before the Hon’ble Delhi High Court in the case of Allen Diesels India Private Limited Vs. Union of India reported in 2016 (334) ELT 624 (Del.), wherein the facts are as under :
“4.. The importers were paying duties of customs including the SAD by using the duty entitlement pass book (‘DEPB’) scrip. However, it appears that the Department was not processing the said applications for refund of SAD in terms of the above Notification No. 102/2007-Cuson the ground that the SAD had been paid, not in cash, but by utilising the DEPB scrip. The importers then made various representations. The Customs officials also sought clarification from C.B.E. & C. on whether the refund could be granted where the initial payment of SAD had been made by utilising the DEPB scrips. As a result the C.B.E. & c. issued Circular No. 6/2008-Customs on 28th April, 2008, clarifying in paras 3 and 7.2 as under :
“3. Manner of refund and its receipt :
Your attention is invited to the instructions communicated vide F. No. 354/129/2007-TRU, dated 14-9-2007 at the time of issue of the Notification No. 102/2007-Cus dated 14.09.2007. It is reiterated that the scheme of refund of 4% Additional Duty of Customs has been notified through an exemption notification, and hence, the conditions as prescribed only in the said notification will apply. All refund applications under the aforesaid notification shall be received by the concerned field formations in their Centralized Refund Section, and the applicants would be given proper acknowledgement. The status of these refund claims shall also be displayed in the online database of customs duty refunds maintained by the respective Commissionerates.
…..
7.2 In respect of the doubt that whether the stamping or hand- writing of declaration in the invoice would be acceptable for the purpose of fulfilling the condition as mentioned in para 2(b) of the said notification, it is clarified that a stamp on the invoice (to state that no CENVAT Credit is admissible) should suffice for the purpose of para 2(b) of the said notification.”
5. It must be noticed straightway that there was no corresponding amendment made to the notification itself. In fact, what the circular stated was that refund of the SAD, which was liable to be made upon fulfilment of the conditions of Notification 102/2007-Customs, would not be in cash but re-credited to the relevant DEPB scrips which were used for making payment of the SAD. However, even this proposed system of re-crediting DEPB scrip was unable to be given effect to. The Director General of Foreign Trade (‘DGFT’) which issued the DEPB scrips apparently had no mechanism for re-crediting them through the electronic data interchange (‘EDI’) system.
6. This led to a further Circular 27/2010-Customs being issued on 13th August, 2010, where, after noting the issuance of the earlier circulars, it was slated that “EDI, at present, does not have facility to register such re-credited scrips issued by DGFT in the system”. The C.B.E. & C. noted that considering the difficulties in allowing re-crediting of scrips and the view of DGFT that such re-crediting through EDI was not feasible and considering the large scale pendency of refund claims, it decided that registration of the re-credited duty scrips “on the basis of consolidated certificate furnished by Customs should be allowed on manual basis”. It was further stated : “The facility of manual filing of Bills of Entry for utilizing the amount of re-credited CVD refund for payment of duty is also allowed. This facility has been extended up to 30-12-2010 as a one-time measure with a view to liquidate all such pendencies by that time”.
7. Para 8 of Circular 27/2010-Customs issued on 13th August, 2010 brought about a change inasmuch as it stated that the importers were to be advised to make initial payment of the Countervailing Duty (CVD) in cash. Para 8 of the said circular read as under :
“8. It has also been decided that importers should be suitably advised that re-credit amount of CVD refund should be used for payment of BCD and CVD only and not for 4% CVD so as to avoid cascading of subsequent re-credit of 4% CVD in the relevant scrips. Further, the Board is of the view that in the interest of ensuring expeditious grant of refund of 4% CVD in cash, the importers may be advised to make the initial payment of 4% CVD in cash.”
8. The time limit for utilizing the re-credited DEPB scrips was extended by issuing further On 29th March, 2012, Circular No. 10/2012-Customs was issued stating that no re- crediting of DEPB scrips would be done if the payment of CVD was done by using the DEPB scrip. While reiterating para 8 of the earlier Circular 27/2010-Customs, it was stated that the importers should be advised to make initial payment of CVD in cash. It noted that the “DGFT has also informed that no re- crediting shall be done if such payment is made by means of scrips. In other words, it was mandated that in future exporters should pay SAD component in cash if they wanted a refund.
9. This was reiterated by a subsequent Circular No. 18/2013- Customs issued on 29th April2013, It extended the time limit for using the re-credited DEPB scrips in case of 4% SAD up to 30th September, 2013.”
And the Hon’ble High Court after examining the issue, has observed as under :
“20. Therefore, the legal position as explained in the above decisions makes it clear that the Circular No. 6/2008-Customs, 10/2012 and 18/2013 issued by the C.B.E. & C. could not have imposed an additional restriction for availing of the exemption in terms of the Notification No. 102/2007-Cus. issued under Section 25(1) of the Act. An amendment to a notification issued in exercise of the powers under Section 25(1) of the Act has to be brought about only by issuing another notification under that provision. Inasmuch as the circulars under challenge seek to impose an additional restriction for grant of refund of the SAD under Notification No. 102/2007-Cus, they are ultra vires of the Act and cannot be legally sustained. Consequently, it is declared that the Circular No. 6/2008-Customs, 10/2012 and 18/2013 issued by the C.B.E. & C., insofar as they seek to deny importers and exporters the refund of the SAD paid by using DEPB scrips, are invalid.
21. The rejection of the petitioner’s refund applications by the orders dated 16th May, 2014 and 20th May, 2014, on the above grounds, is held to be bad in law and the said orders are hereby set aside. Since the petitioner has fulfilled the conditions set out in Notification No. 102/2007-Cus for availing of the refund, the Department is directed to issue orders granting refund to the petitioner, as prayed for by it in its four refund applications dated 8th October, 2013, 22nd November, 2013, 16th December, 2013 and 21st December, 2014 not later than four weeks from today. The petitioner’s entitlement to interest on the amount of refund will also be considered and granted in accordance with law within the same period of four weeks from today.”
5. Again, this issue was also examined by this Tribunal in the case of Virgo Suitings Private Limited vide Final Order No. A/86139-86140/2022 dated 02.12.2022, wherein this Tribunal has observed as under :
“6. I have heard rival submissions and gone through the case records including the submissions and case laws cited by respective sides. The Notification dated 14/09/2007 as amended by Notification dated 01/08/2008 nowhere denied the refund when the same was paid by debiting DEPB scripts. The said notification laid down certain conditions and the exemption under Notifications has to be upon fulfilment of those conditions only and nothing else. It is not disputed that the appellant have fulfilled the conditions therein and that is why the refund has been sanctioned of that part of the duty which has been paid in cash. Had those the condition were not fulfilled then there was no question of Adjudicating Authority’s sanctioning the refund. In a series of decisions it is held that debit of any amount under the DEPB scheme, is a mode of payment of duty of exported goods and it cannot be treated as exempted goods. An identical issue came up for consideration before the Hon’ble High Court of Delhi of Allen Diesels India Pvt. Ltd. v/s Union of India 2016 (334) E.L.T. 624 (DEL) wherein the importers were paying duty of Custom including SAD by using DEPB scrips but the department was not refunding the SAD on the ground that SAD had not been paid in cash but by utilizing DEPB scrips and the Hon’ble High Court vide order dated 01/02/2016 allowed the petitions filed by the importers and held that since the petitioner therein have fulfilled the conditions set out in Circular No. 10/2012-Customs for availing the refund, the department is directed to issue orders granting refund to the petitioner therein. The relevant paragraphs of aforesaid decisions is reproduced hereunder:-
“13. The stand of the Department is that since the importers and exporters were put on notice that in order 4 C/86324-86325/2019 to seek refund they would have to make payment of the SAD only in cash aid not by way of DEPB scrips, the petitioner’s applications for refund of SAD, to the extent it was not paid in cash, was rightly rejected. Reliance is placed on the very circulars which have been challenged by the petitioner as ultra vires of the Act. It is in the above context the question arises whether the above circulars could have been issued restricting the entitlement of the importers and exporters to refund in terms of Notification No. 102/2007-Cus, without the said notification itself being amended.
xxx xxx xxx
15. At the outset, the Court notes that Section 151A of the Act is for a very limited purpose of issuing of instructions to officers of customs for the purpose of “uniformity in the classification of goods or with respect to the levy of duty thereon” or for the implementation of any other provisions of this Act or of any other law for the time being in force, insofar as they relate to “any prohibition/restriction for import or export of goods.” The above provision does not envisage any amendment being made to an exemption notification that may have been issued in exercise of powers under Section 25(1) of the Act. An amendment through notification can possibly be brought about only by again exercising the powers under Section 25(1) of the Act. In this very context, it may be noticed that one instance of such amendment is the issuance of Notification No. 93/2008-Customs, dated 1st August, 2008 under Section 25(1) of the Act to bring about an amendment to Notification No. 102/2007-Cus to introduce a time limit within which claims for refund of the SAD should be made by importers.
16. Although it is sought to be projected that the circulars which are subject matter of the challenge in the present petitions were issued to streamline the procedure and to remove ambiguities, in fact what the circulars seek to amend is Notification No. 102/2007-Cus itself by introducing an additional condition for being entitled to 5 C/86324-86325/2019 refund, which condition does not find place in Notification No. 102/2007-Cus. This condition is to the effect that if the payment of the SAD has in the first place not been made in cash, but by using a DEPB scrip, then the importers concerned would not be entitled to refund of SAD in cash. It is not in dispute that there is no such restriction in Notification No. 102/2007-Cus even as on date.
17. The question whether the device of circulars could be adopted for modifying a notification has come up for consideration before the Court In Sandur Micro Circuits Ltd. v. Commissioner of Central Excise, 2008 (8) TMI 3-SC = 2008 (229) E.L.T. 641 (S.C.), it was inter alia held that : “A Circular cannot take away the effect of notifications statutorily issued. In fact in certain cases it has been held that the Circular cannot whittle down the exemption notification and restrict the scope of the exemption notification or hit it down. In other words it was held that by issuing a circular a new condition thereby restricting the scope of the exemption or restricting or whittling it down cannot be imposed”.
18. In Modi Rubber Ltd. v. Union of India, 1978 (2) E.L.T. (J127) (Del.), a similar issue was examined and this Court held as under : “Further, it is quite open to the Government to grant an exemption subject to conditions. If the object of the Government in granting an exemption is to benefit the consumer by the reduction of the selling price of the goods, then the Government notification grating the exemption should itself say For instance, notification GSR 1089, dated 29th April, 1969 expressly stated that the benefit of the exemption was to be available only to those manufacturers who produce proof to the satisfaction of the Collector that such benefit has 6 C/86324-86325/2019 been passed on by them to whom they have sold the goods. Such a condition has to be a part of the exemption notification. For, the notification is “law”. But, after enacting the law, such a condition cannot be imposed by administrative directions, guidelines or press note. These administrative acts cannot go contrary to the statutory notification”.
19. Recently in Pioneer India Electronics (P) Ltd. v. Union of India, 2014 (301) E.L.T. 59 (Del.) it was observed as under : “The word “exemption” as used in sub-section (1) to Section 25 can and should include extension or increase in time but cannot be stretched and expounded to include power of the Government to, by a circular, reduce the statutory time for a claim of refund stipulated under the principal enactment, i.e., the Customs Act, That would make the circular ultra vires the statute and beyond the scope of the Act, Rules, etc. Circulars might depart from the strict tenure of the statutory provision and might mitigate rigours of law thereby granting administrative relief beyond terms of the relevant provisions of the statute, but the Central Government is not empowered to withdraw benefits or impose harsher or stricter conditions than those postulated by the statute. In later cases, circulars can supplant the law but not supplement the law.”
20. Therefore, the legal position as explained in the above decisions makes it clear that the Circular No. 6/2008-Customs, 10/2012 and 18/2013 issued by the C.B.E. & C. could not have imposed an additional restriction for availing of the exemption in terms of the Notification No. 102/2007-Cus. issued under Section 25(1) of the An amendment to a notification issued in exercise of the powers under Section 25(1) of the Act has to be brought about only by issuing 7 C/86324-86325/2019 another notification under that provision. Inasmuch as the circulars under challenge seek to impose an additional restriction for grant of refund of the SAD under Notification No. 102/2007-Cus, they are ultra vires of the Act and cannot be legally sustained. Consequently, it is declared that the Circular No. 6/2008-Customs, 10/2012 and 18/2013 issued by the C.B.E. & C., insofar as they seek to deny importers and exporters the refund of the SAD paid by using DEPB scrips, are invalid.
21. The rejection of the petitioner’s refund applications by the orders dated 16th May, 2014 and 20th May, 2014, on the above grounds, is held to be bad in law and the said orders are hereby set aside. Since the petitioner has fulfilled the conditions set out in Notification No. 102/2007-Cus for availing of the refund, the Department is directed to issue orders granting refund to the petitioner, as prayed for by it in its four refund applications dated 8th October, 2013, 22nd November, 2013, 16th December, 2013 and 21st December, 2014 not later than four weeks from The petitioner’s entitlement to interest on the amount of refund will also be considered and granted in accordance with law within the same period of four weeks from today.”
While relying upon aforesaid decision of Hon’ble High Court, this Tribunal in the matter of M/s. Armstrong World Industries (India) Private Limited V/S. Commissioner of Customs Nhava Sheva-III; 2021 (11) TMI 912- CESTAT Mumbai, allowed the appeal of the importer and held that the order that has rejected the refund benefit to the appellants therein arising out of the Notification dated 14/09/2007 as amended, has no merits. Similarly Ahmedabad bench of the Tribunal in the matter of M/s. Surya Roshni Ltd v/s Commissioner of Customs, Ahmedabad; 2022 (5) TMI 1108-Cestat Ahmedabad, while relying upon aforesaid decision of the Hon’ble High Court in the matter of M/s Allen Diesels (supra) allowed the appeal of the appellant therein. Undisputedly, the Revenue has failed to establish through any kind of documents or case laws that debit of any amount under 8 C/86324-86325/2019 the DEPB scheme is not a mode of payment of duty, therefore the benefit cannot be denied to the appellant.
7. In view of the discussions made hereinabove, I do not find any justification for rejecting the refund claim in respect of the duty which was paid through DEPB scrip and therefore the impugned order cannot sustain. Accordingly, the appeals filed by the appellant are allowed with consequential relief, if any, in accordance with law.”
6. As the issue is no more res-integra in view of the judicial pronouncements of the Hon’ble High Court and the Tribunal and the Commissioner (Appeals) has followed the same.
7 In that circumstances, we do not find any infirmity in the impugned order and the same is upheld and the appeal filed by the Revenue is dismissed.
(Operative part of the order was pronounced in the open court)
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