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Case Law Details

Case Name : FCI OEN Connectors Vs Commissioner Of Central Tax & Central Excise (CESTAT Bengalore)
Appeal Number : Service Tax Appeal No. 20373 of 2021
Date of Judgement/Order : 21/10/2021
Related Assessment Year :

FCI OEN Connectors Vs Commissioner Of Central Tax & Central Excise (CESTAT Bengalore)

The Hon’ble Customs, Excise & Services Tax Appellate Tribunal, Bangalore (“CESTAT”) in the matter of M/s FCI OEN Connectors v. Commissioner Of Central Tax & Central Excise, Cochin [Final Order No. 20795/2021 dated October 21, 2021] held that when the customs duty is paid in excess, the department is liable to refund the same and the limitation provided under Section 27 of the Customs Act, 1962 (Customs Act) will not be applicable.

M/s FCI OEN Connectors (“the Appellant”) filed the current appeal being aggrieved ofthe Order-in-Appeal passed by the Commissioner (Appeals), Kochi, whereby the Commissioner (Appeals) has upheld the rejection of refund claim under Section 11B of the Central Excise Act, 1944 (“the Central Excise Act”). Factually, It is the case of the Appellant that they have filed a refund claim of Rs.14,88,888/- being the Service tax paid on ocean freight for the period April 2017 to June 2017 but High Court of Gujarat in the case of SAL Steel Ltd. v. UOI [2019 (9) TMI 1315-Gujarat HC dated September 06, 2019] has clearly held that the levy in question was ulta vires Section 64, Section 66B and Section 65B(52) of the Finance Act, 1994 (“the Finance Act”) which decision was followed by the Gujarat High Court again in the case of Polycab India Limited Vs UOI [2020 (2) EMI 410- Gujarat HC dated January 30, 202]0 wherein, the High Court had held that the levy of service tax on ocean freight is unconstitutional.

The Hon’ble CESTAT after considering the rival contentions and after going through all the various decisions relied upon during the course of arguments clarified that it is a case where the Service tax has been held to be unconstitutional hence, the tax which is paid would amount to the one paid under mistake of law.

Further, the CESTAT relied upon the case M/s DHL Express India Pvt. Ltd. Vs Commissioner of Service Tax [2021-TIOL-1830-HC-KAR-CUS dated October 12, 2017] and held that when the customs duty is paid in excess, the department is liable to refund the same and the limitation provided under Section 27 of the Customs Act will not be applicable. Therefore, held that the lower authority has erred in law and fact, solely relying on Section 27 of the Customs Act while dismissing the application of the Appellant.

Hence, CESTAT do not find any justification in the reasons adopted for rejection of the refund claim by the lower authorities. Therefore, set aside the Order-in-Appeal and allowed the appeal.

FULL TEXT OF THE CESTAT BANGALORE ORDER

By this appeal, the appellant has challenged the Order-in-Appeal passed by the Commissioner (Appeals), Kochi, whereby the Commissioner (Appeals) has upheld the rejection of refund claim under Section 11B of the Central Excise Act. It is the case of the appellant that they have filed a refund claim of Rs.14,88,888/- being the service tax paid on ocean freight for the period April 2017 to June 2017 but Hon’ble High Court of Gujarat in the case of SAL Steel Ltd. Vs UOI-2019 (9) TMI 1315-Gujarat HC has clearly held that the levy in question was ulta vires Section 64, Section 66B and Section 65B(52) of the Finance Act, 1994 which decision was followed by the Hon’ble Gujarat High Court again in the case of Polycab India Limited Vs UOI-2020 (2) EMI 410- Gujarat HC wherein, the Hon’ble High Court had held that the levy of service tax on ocean freight is unconstitutional.

2. Heard Smt. Neethu James, learned Advocate for the appellant and Smt. C.V.Savitha, learned Authorized Representative for the Respondent, considered the rival contentions and have also gone through the various decisions relied upon during the course of arguments. It is a clear case where the service tax has been held to be unconstitutional hence, the tax which is paid would amount to the one paid under mistake of law. In a similar situation, the jurisdictional Hon’ble High Court of Karnataka in one of its decisions in the case of CCE (Appeals), Bangalore Vs KVR Construction-2012 (26) STR 195 (Kar.) has observed as under:

Limitation period for granting refund not applicable to refund of Custom duty paid in excess

“23. Now we are faced with a similar situation where the claim of the respondent/assessee is on the ground that they have paid the amount by mistake and therefore they are entitled for the refund of the said amount. If we consider this payment as service tax and duty payable, automatically, Section 11B would be applicable. When once there was no compulsion or duty cast to pay this service tax, the amount of Rs. 1,23,96,948/- paid by petitioner under mistaken notion, would not be a duty or “service tax” payable in law. Therefore, once it is not payable in law there was no authority for the department to retain such amount. By any stretch of imagination, it will not amount to duty of excise to attract Section 11B. Therefore, it is outside the purview of Section 11B of the Act.”

The SLP against this order was dismissed by the Hon’ble Supreme Court.

3. In one another case, M/s DHL Express India Pvt. Ltd. Vs Commissioner of Service Tax-2021-TIOL-1830-HC-KAR-CUS, the Hon’ble jurisdictional High Court again dealt with the same situation and after analyzing Section 27 of the Customs Act vis-à-vis various case laws, has held as under:

“14. In the considered opinion of this Court, in the light of the judgment of Mafatlal Industries Ltd. (supra), wherein it has been categorically held that for refund of the amount, the duty paid without authority of law, the refund provisions under Section 27 of the said Act of 1962 are not applicable and the limitation applicable is in terms of the Limitation Act and not one year specified under Section 27 of the said Act of 1962.

15. In the present case, duty of customs payable on the transaction in question under the statute is Rs.4,743/-, which has been admitted by the respondent and on account of erroneous calculation, the duty has been paid in excess to the tune of Rs.42,26,975/-. The Authorities have turned down the claim of appellant on the ground of limitation. The claim of the appellant could have been corrected and the Tribunal has erred in observing that the payment of excess duty requires to be rectified under Section 154 of the said Act of 1962. The Authorities ought to have refunded the said excess amount to the appellant Company either upon their application or on an application made by the importer. In the case of Mafatlal Industries Ltd. (supra), it has been held that in order to claim excess duty paid, which falls outside the purview of the said Act of 1962, the limitation provided under Section 27 is not applicable. Hence, the appellant-company is certainly entitled for refund of duty.

…..

17. In the light of the law laid down by the Hon’ble Supreme Court and the other High Courts keeping in view the peculiar facts and circumstances of the case, it is crystal clear that when the customs duty is paid in excess, the department is liable to refund the same and the limitation provided under Section 27 of the said Act of 1962 will not be applicable. Therefore, the Tribunal has erred in law and fact, solely relying on Section 27 of the said Act of 1962 while dismissing the application of the appellant-Company.”

4. Keeping in view of the settled legal position, I do not find any justification in the reasons adopted for rejection of the refund claim by the lower authorities and hence, the impugned order is not sustainable in the eye of law. Therefore, the impugned order is set aside and the appeal is allowed with consequential benefits, if any, as per law.

(Order pronounced in the Open Court on 21/10/2021)

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