CESTAT rules Cess on Prawn and Shrimp Exports Unlawful, Grants Refunds to Exporters [Read Order]

The Chennai Bench of Customs,Excise and Service Tax Appellate Tribunal(CESTAT) ruled that the cess imposed on prawn and shrimp exports between 1998 and 2005 was unlawful and upheld the exporters' right to refunds.

Sandhya Marines Limited,appellant-assessee,exported prawns and shrimps between 1998-1999 and 2004-2005. The department treated them as fish and imposed a 0.5% cess under the Agricultural Produce Cess Act, 1940. Exporters challenged this before the Andhra Pradesh High Court, which ruled in their favor, holding that prawns and shrimps were not fish and cess was not applicable.

The Supreme Court later upheld this decision in Commissioner of Customs vs. Jaya Satya Marine Exports Pvt. Ltd. and other appeals, confirming that cess could not be levied on prawn and shrimp exports.

Following this, the assessee filed refund claims, which were allowed by the Commissioner (Appeals). The authority held that the cess was collected without legal backing and sanctioned refunds, considering them as deposits, not time-barred under the Customs Act, 1962.

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The department appealed before the CESTAT, which dismissed the appeal and upheld the refund orders. The Madras High Court later confirmed this ruling, rejecting the department’s appeals. The Supreme Court also dismissed the department’s civil appeals, settling the matter judicially.

The assessee then sought refunds, which were sanctioned by the adjudicating authority, ruling that there was no unjust enrichment. However, the Commissioner (Appeals), Chennai, later overturned this, rejecting the refund claims on the grounds of unjust enrichment and time-bar, and ordered the recovery of the refunded amounts.

Aggrieved by the decision the assessee appealed before the tribunal.

Read More: CESTAT Allows Refund Claims: Holds Procedural Lapses Can’t Deny Exemption Benefits

The two member bench comprising P.Dinesha( Judicial Member ) and Vasa Seshagiri Rao(Technical Member) set aside the impugned orders-in-appeal dated July 22, 2013, which directed the recovery of refunded amounts with interest. It held that cess on prawn and shrimp exports was wrongly collected and ruled in favor of the exporters.

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The appellate tribunal referred to the Supreme Court’s decision in Jaya Satya Marine Exports Pvt. Ltd., which clarified that cess was not leviable on prawns and shrimps. It concluded that the payments were made under protest, making the limitation period inapplicable.

The bench noted that the assessee had filed refund claims for cess paid between 1998 and 2005. The Deputy Commissioner of Customs (Refunds) initially rejected the claims, citing time-bar and lack of original shipping bills. However, the Commissioner (Appeals) later overturned this rejection in 2006 and remanded the matter. The tribunal upheld the ruling, affirming that cess was not applicable.

Despite this, the department challenged the refunds, arguing they were time-barred and impacted by unjust enrichment. The CESTAT rejected this argument, relying on Chartered Accountant certificates confirming that the cess burden was not passed on to foreign buyers.

Citing the Supreme Court’s ruling in Mafatlal Industries Ltd. vs. Union of India, the tribunalheld that the government could not retain unlawfully collected cess, as it violated Article 265 of the Constitution.

Based on these findings, the CESTAT ruled that the exporters were entitled to the refunds.

To Read the full text of the Order CLICK HERE

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