Commissioner of Customs Vs Hindustan Zinc Limited (Supreme Court of India)
Summary: The Supreme Court of India, in Commissioner of Customs Vs Hindustan Zinc Limited, decided a batch of Revenue appeals concerning the applicability of the doctrine of unjust enrichment to refunds arising from the finalisation of provisional assessments. The principal appeal, Civil Appeal No. 10691 of 2011, was heard along with several connected appeals involving the same legal issue. The central question was whether amounts deposited towards provisional customs duty as a condition for clearance of imported goods could be refunded following the conclusion of assessment proceedings under Section 18 of the Customs Act, without applying the doctrine of unjust enrichment. The Court examined earlier judicial pronouncements concerning provisional assessment under Rule 9B of the Central Excise Rules and the distinction between refunds arising automatically from final assessment and independent refund claims made after the assessment process. The Revenue challenged decisions that had followed earlier Supreme Court rulings permitting refunds consequent upon finalisation of provisional assessments without requiring the claimant to establish that the incidence of duty had not been passed on to another person.
The Supreme Court referred to Commissioner of Customs, New Delhi Vs M/s Oriental Exports, New Delhi, reported in 2003 (156) ELT 161, which had considered the refund consequences of provisional assessments. It also examined Commissioner of Central Excise, Mumbai-II Vs Allied Photographics India Ltd., (2004) 4 SCC 34, a three-Judge Bench decision concerning the doctrine of unjust enrichment. The Court recorded that the earlier decisions had recognised the distinction between refunds arising upon finalisation of provisional assessments and claims governed by the ordinary statutory refund mechanism. The impugned judgments had followed the approach adopted in Oriental Exports and Allied Photographics. The Revenue’s challenge therefore required consideration of whether those decisions remained applicable in view of a subsequent Supreme Court ruling apparently expressing a different position.
The Court specifically considered Sahakari Khand Udyog Mandal Ltd. Vs Commissioner of Central Excise & Customs, (2005) 3 SCC 738, wherein another three-Judge Bench had held that a claimant seeking refund must establish that the duty burden had not been passed on to consumers. The Supreme Court observed that this later decision appeared to have overlooked the ruling in Allied Photographics. It further noted that Sahakari Khand Udyog Mandal had referred generally to the nine-Judge Bench decision in Mafatlal Industries Ltd. & Ors. Vs Union of India & Ors., (1997) 5 SCC 537, without adequately considering the specific observations contained in paragraph 104. The Court accordingly examined that paragraph, which distinguishes adjustments and refunds consequent upon finalisation of provisional assessments under Rule 9B(5) from refunds arising through subsequent appellate, writ or independent refund proceedings. This distinction was central to the Supreme Court’s resolution of the apparent inconsistency between the earlier decisions.
Paragraph 104 of Mafatlal Industries explains that where goods are provisionally assessed, the duty initially collected must be adjusted against the duty finally determined. If the provisional collection exceeds the final liability, the assessee becomes entitled to the corresponding refund; if the provisional collection falls short, the deficiency becomes payable. The nine-Judge Bench had stated that recoveries or refunds arising directly from this adjustment under Rule 9B(5) are not governed by Sections 11A or 11B of the Central Excise Act. However, where a final assessment order is subsequently challenged in an appeal, writ petition or other proceeding and a refund becomes payable because of the result of that challenge, the statutory refund provisions apply. The same treatment extends to an independent refund claim filed after the final assessment seeking to reopen matters already decided. Thus, the distinction depends on the legal source of the refund entitlement rather than merely on the fact that provisional assessment proceedings had occurred earlier.
Applying these principles, the Supreme Court held that the ruling in Sahakari Khand Udyog Mandal Ltd. must be confined to the facts of that case. The Court found no infirmity in the findings and conclusions recorded in the judgments challenged by the Revenue, since they were consistent with the principle recognised in Allied Photographics. Accordingly, the Supreme Court dismissed the Revenue’s appeals by its order dated 23 March 2023. The decision affirms, in the context of the provisional assessments under consideration, the distinction between refunds flowing directly from finalisation of provisional assessment and separate refund claims governed by statutory refund requirements. The judgment should not be read as eliminating unjust-enrichment requirements for every customs or excise refund irrespective of the applicable statutory provisions, amendments and nature of the claim.
Cases Discussed
- Commissioner of Customs, New Delhi Vs M/s Oriental Exports, New Delhi — 2003 (156) ELT 161 (Supreme Court). Considered concerning refunds following provisional assessment.
- Commissioner of Central Excise, Mumbai-II Vs Allied Photographics India Ltd. — (2004) 4 SCC 34 (Supreme Court). Considered regarding unjust enrichment and finalisation of provisional assessment.
- Sahakari Khand Udyog Mandal Ltd. Vs Commissioner of Central Excise & Customs — (2005) 3 SCC 738 (Supreme Court). Distinguished and confined to its facts.
- Mafatlal Industries Ltd. & Ors. Vs Union of India & Ors. — (1997) 5 SCC 537 (Supreme Court, Nine-Judge Bench). Paragraph 104 examined regarding the distinction between provisional assessment adjustments and independent refund claims.
FULL TEXT OF THE SUPREME COURT JUDGMENT/ORDER
Special leave granted in SLP(C) No. 11169/2022.
In all these cases the common question which arises is whether claim for refund of amounts deposited towards provisional duty, as a condition for clearance of imported goods can be the subject matter of refund after conclusion of assessment proceedings and having regard to its outcome, under Section 18 of the Customs Act. It is not disputed that this issue has been considered both in the context of provisional assessment under Rule 9-B of the Central Excise Rules by judgments of this Court as well as in the context of Section 18 of the Customs Act, in “Commissioner of Customs, New Delhi vs. M/s Oriental Exports, New Delhi” [2003 156 ELT 161]. The Court held that even though Rule 9-B of the Customs Rules (applicable in that case) was not retrospective, nevertheless pending applications were entitled to the relief prescribed by it. This Court had occasion again to consider the issue in the light of the conflict of decision by a three Judge Bench, in a three Judge Bench decision in “Commissioner of Central Excise, Mumbai-II vs. Allied Photographics India Ltd.” [(2004) 4 SCC 34]. The Court held that the doctrine of unjust enrichment was not applicable to provisional assessment even after finalization of the proceedings.
The impugned judgments in all these appeals have followed view expressed in “Oriental” and “Allied”.
It is brought to the notice of this Court that a judgment subsequent to the ruling in “Allied” i.e. “Sahakari Khand Udyog Mandal Ltd. vs. Commissioner of Central Excise & Customs” [(2005) 3 SCC 738] appears to have expressed a different view in that the Court held that to maintain a claim for refund, the assessee has to establish that he or it had paid the amount for which relief is sought and had not passed on the burden to the consumers. This judgment though rendered by a three Judge Bench, overlooked the ruling in Allied (supra). Furthermore, even though the judgment has generally referred to the nine Judge Bench ruling in “Mafatlal Industries Ltd. & Ors. vs. Union of India & Ors.” [(1997) 5 SCC 537], nevertheless the specific observations in para 104 appears to have escaped the attention of the Court. Para 104 in Mafatlal Industries Ltd., is extracted below:
104. Rule 9-B provides for provision assessment in situations specified in clauses (a), (b) and (c) of sub-rule (1). The goods provisionally assessed under sub-rule (1) may be cleared for home consumption or export in the same manner as the goods which are finally assessed. Sub-rule (5) provides that “when the duty leviable on the goods is assessed finally in accordance with the provisions of these Rules, the duty provisionally assessed shall be adjusted against the duty finally assessed, and if the duty provisional assessed falls short of or is in excess of the duty finally assessed, the assessee shall pay the deficiency or be entitled to a refund, as the case may be”. Any recoveries or refunds consequent upon the adjustment under sub rule (5) of Rule 9-B will not be governed by Section 11-A or Section 11-B as the case may be. However, if the final orders passed under sub-rule (5) are appealed against – or questioned in a writ petition or suit, as the case may be, assuming that such a writ or suit is entertained and is allowed/decreed – then any refund claim arising as a consequence of the decision in such appeal or such other proceedings, as the case may be, would be governed by Section 11-B. It is also made clear that if an independent refund claim is filed after the final decision under Rule 9-B(5) reagitating the issues already decided under Rule 9-B – assuming that such a refund claim lies – and is allowed, it would obviously be governed by Section 11-B. It follows logically that position would be the same in the converse situation. Nature and character of refund claims under the Central Excises and Salt Act and the Customs Act.
The judgment in “Sahakari Khand Udyog Mandal Ltd.”, in this Court’s considered view, has to be confined to the facts of that case for the reasons mentioned above. In this view of the matter, there is no infirmity with the findings and conclusions recorded in the impugned judgments, which are in accord with the ratio in Allied (supra). The revenue’s appeals are, accordingly, dismissed.
The revenue’s appeals are dismissed in terms of signed order.
All pending applications are disposed of.
SLP(C) No. 150/2016 and C.A. No. 13501/2015
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