Refund of excess duty paid on provisional basis won’t attract doctrine of unjust enrichment

In the instant case, shipping agent of the Atlantic Shipping (P.) Ltd.  (the Respondent) paid  the provisionally assessed Customs duty on estimated quantity of bunker fuel to be consumed during the coastal run. On completion of the final assessment, the Respondent filed a refund application as duty had earlier been paid in excess on provisional assessment basis. The Assistant Commissioner observed that for refund of the duty paid on provisional basis, unjust enrichment is not attracted. It was further observed that the refund claim on imported goods on which duty was   paid provisionally were used captively. Accordingly,  the Assistant Commissioner sanctioned  refund of the excess duty paid on provisional basis.

However, the Revenue filed an appeal before the Commissioner (Appeals) on the ground that the provision of unjust enrichmentis attracted in the facts and circumstances of the case as the Respondent might have transferred the cost indirectly for the services rendered during the coastal run.

The Commissioner (Appeals) dismissed the appeal of the Revenue on the premise that the duty leviable on Bunker estimated to be consumed during coastal run of the vessel has been  recovered by   Department on provisional assessment of Bill of Entry in terms of Board’s Circular No. 58/97 dated November 6, 1997 (“the Circular”).

Similarly, steamer agent is entitled to refund of duty in case of unutilized duty paid in terms of the Circular read with Board’s letter F. No. 450/66/2005-Cus-IV dated November 24, 2005. Further, reliance was placed on the ruling of the Hon’ble Ahmedabad Tribunal in the case of Commissioner of Customs Vs. Ambica Maritime Ltd. [2007 (220) ELT 887 (Trib – Ahd.)], wherein it was held that while vessel is convened from foreign run to coastal run and Customs duty on ship stores deposited on provisional assessment basis on their estimated consumption during coastal run, the payment was based on estimate. It was held that such payment is not duty but only a deposit or notional amount on which doctrine of unjust enrichment is   not applicable as provided under Section 27 read with Section 28D of the Customs Act, 1962.

The Revenue filed an appeal  before the Hon’ble Mumbai Tribunal͘.

The Respondent relied on the Circular and the ruling of the Hon’ble Karnataka High Court in the case of Commissioner of Customs Vs. Agrotech Foods Ltd. [2010 (249) ELT 348] wherein it was held that on the adjustment of amount paid  on provisional basis,    doctrine of unjust enrichment is not attracted.

The Hon’ble Tribunal rejected the contention of the Revenue on the ground that if the contention of the Department was agreed to, it would render the entire scheme of provisional assessment meaningless.

(Bimal Jain, FCA, FCS, LLB, B.Com (Hons), Mobile: +91 9810604563, Email: bimaljain@hotmail.com)