Refund Authority cannot rectify Mistakes of Importer under Customs Act: Madras High Court [Read Judgment]

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A two-judge bench of the Madras High Court has held that a mistake committed by the importer can be corrected under Section 154 of Customs Act by the assessing officer and not by the refund authority.

The assessee-Company filed a bill of entry in order to import chemicals. The duty was paid on the goods and was assessed on the amount covered by nine invoices. However, the imported items were in fact covered under eight invoices and the ninth invoice was covered in a separate bill of entry, which was permitted to be cleared upon payment of duty. Thus, the assessee claimed to have paid duty twice on the same invoice, owing to which the balance amount was liable to be refunded.

When the assessee approached the jurisdictional Assistant Commissioner of Customs (Refund) for refund, the officer advised them to get the assessment order pertaining to such bill of entry reviewed, by means of an appeal to the Commissioner (Appeals). A review petition filed by the assessee was also dismissed for the reason that the refund claim was not maintainable as the assessee had not challenged the assessment order passed in respect of the ninth bill of entry.

On appeal, the Tribunal held that the clerical error or arithmetical error could be rectified suo motu under Section 154 of the Act and refund could be allowed to importer as a consequence of correction of clerical error under Section 154 of the Act, when the importer had not filed refund claim under Section 27 of the Act.

Upholding the order of the Tribunal, the bench comprising Justices T.S.Sivagnanam, and V.Bhavani Subbaroyan observed that the scope of Section 154 should not be restricted. However, it disagreed with the Tribunal’s observation that the assessee would be entitled to refund of excess duty paid on correction of the error in the assessment order, subject to scrutiny from the aspect of unjust enrichment.

“At the first instance, a reading of Section 154 of the Act gives us an impression that clerical or arithmetical error which has occurred in orders passed by the Government Board or any officers of that Department, or errors arising from such order due to accidental slip or omission alone can be corrected. However, what is to be borne in mind is the procedure prescribed for amendment of bills of entry or for amendment of export documents which are documents originating from the exporter or importer. However, so far as the orders to be passed under the provisions of the Act is concerned, the power to correct the same can vest only with the authorities. Therefore, Section 154 of the Act specifically deals with such a power. The said provision does not in any manner restrict the exercise of power when a clerical or arithmetical mistake is pointed out by the importer or exporter for reasons attributable to the importer or exporter. Therefore, the interpretation given by the first appellate authority as well as the Revenue, before us, if given, would undoubtedly, restrict the power of Section 154 of the Act which is impermissible,” the Court said.

The High Court further observed that in the present case, the assessee could not correct the order.

“In the instant case, the assessee cannot correct the order, but the fact remains, an invoice which did not form part of the bill of entry was inadvertently included, assessed to tax and tax was also paid. The same invoice was subject matter of another bill of entry which was assessed to tax and tax was cleared. Therefore, the error is apparent on the face of the order. All that was required to be done was to verify the bill of entry and if that has been done, the entire time lost in this litigation could have been avoided. Therefore, in our considered view, this would be the right interpretation of Section 154 of the Act in addition to what was held by the Delhi and Mumbai Tribunals in the aforementioned decisions,” the Court said.

Thus the Tribunal’s directions allowing the refund of the duty were quashed and the matter was remanded to to the AO to consider the assessee’s request, take note of the facts and exercise power under Section 154 of the Act and proceed to pass orders in accordance with law.

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