Failure to Consider BoE Duly Explained by CA Certificate: CESTAT quashes Customs Refund Rejection Order [Read Order]

Recently, the Customs, Excise, and Service Tax Appellate Tribunal ( CESTAT ) in Chennai overturned a Customs department order that had rejected a refund claim by one assessee/ appellant, Shriram Impex India Pvt. Ltd. for the Special Additional Duty ( SAD ) on goods imported into India, observing that there was a failure to consider BoE duly explained by CA certificate before rejecting the refund claim.

The tribunal’s decision came in response to an appeal filed by the assessee, Shriram Impex, challenging the earlier decision by the Commissioner of Customs (Appeals), Chennai, which had denied the refund for four specific Bills of Entry, citing concerns over "unjust enrichment" and procedural deficiencies.

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The issue began when the assessee sought a refund of the SAD paid on imported goods, which had been initially sanctioned by the Lower Adjudicating Authority. However, the Customs Department appealed against this approval concerning four Bills of Entry dated May 31, 2011. The department contended that the refund was based on a Chartered Accountant (CA) certificate, which allegedly only covered transactions up to May 31, whereas the payment of duty for the four contested Bills of Entry occurred in June. This discrepancy, according to the Customs Department, excluded these Bills of Entry from the scope of the CA certification and raised questions about compliance with statutory requirements.

The appellant’s counsel, Shri Derrick Sam, argued that the Commissioner of Customs (Appeals) issued its decision without granting the assessee a personal hearing, a significant procedural lapse given that the assessee had specifically requested one. He pointed out that the CA certificate was intended to confirm that the SAD had not been transferred to customers, thus preventing any unjust enrichment.

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The counsel also highlighted that the duty payments for the contested bills were initially debited under the Duty Entitlement Passbook (DEPB) scheme on May 31, 2011, and the remaining amount was settled the following day. He argued that the CA certificate, along with supporting ledger accounts and sales invoices, demonstrated that the assessee had not passed the duty burden onto its customers, complying with the requirements outlined in relevant Customs Circulars.

The Tribunal bench of Technical Member M. Ajit Kumar, agreed with the appellant’s stance. It found the lack of a personal hearing to be a serious procedural error, deeming it sufficient grounds to challenge the validity of the Commissioner’s decision. The Tribunal reviewed the evidence presented, confirming that the assessee had indeed complied with statutory requirements by debiting the duty on the specified date and later completing the payment.

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Furthermore, the invoices contained a clear endorsement that no credit of the Additional Duty of Customs would be availed or passed on to subsequent buyers. The Tribunal noted that this documentation fulfilled the conditions outlined under Notification No. 102/2007 and prevented any unjust enrichment.

Additionally, the Tribunal referenced the precedent set by the Madras High Court in P.P. Products Ltd. v. Commissioner (2019), where the importance of documentary evidence in refund claims and limited the scope for Customs authorities to question the accuracy of CA certifications unless fraud or misrepresentation was proven, was discussed. In line with this judgment, the Tribunal affirmed that the assessee had met all documentary requirements to substantiate its refund claim.

In conclusion, the CESTAT set aside the Commissioner’s rejection of the refund claim, upholding the sufficiency of the CA certificate and supporting documents to validate the refund request.

To Read the full text of the Order CLICK HERE

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