Relief to Indian Oil Corporation: CESTAT Sets aside Order rejecting Customs Duty Refund Citing Limitation [Read Order]

In a ruling in favour of Indian Oil Corporation, the Ahmedabad  bench of the Customs, Excise & Service Tax Appellate Tribunal (CESTAT) set aside the order which reject the refund of customs duty citing the bar of limitation.

Indian Oil Corporation Limited, the appellant imported Crude Petroleum Oil and filed into Bond B/E for warehousing under Section 46 of the Act and said B/E was assessed provisionally. Subsequently, they filed Ex-Bond B/E for home consumption under Section 68 of the said Act for clearance of warehoused goods, which was also assessed provisionally. Later on at the time of final assessment, demurrage charges came to be included in the assessable value, which was agitated by the said appellants. Eventually, the appeal was allowed in this regard. Feeling aggrieved from the said decision the department preferred an appeal before Tribunal and the same was rejected by the CESTAT vide order dated 13.10.2015.

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 In these circumstances, the appellant filed a refund claim for Rs. 6,19,110/- on 1st December, 2015 under Section 27 of the Customs Act, 1962, as a consequence of order passed by CESTAT rejecting the appeal.  The lower adjudicating authority found vide order dated 16.02.2016 that the duty had become refundable as a consequence of the relevant order-inappeal dated 3rd June, 2008 passed by the first appellate authority. The said Order-in-Original remained in force during that period. The claim has been filed on 1st December, 2015 and it was not filed within the stipulated time limit in terms of Section 27 of the said Act and therefore, it is hit by limitation.

The lower adjudicating authority also found that even otherwise the refund amount was to be credited to the Consumer Welfare Fund since the refund amount Rs. 6,19,110/- has been booked on 30.09.2015 in the fiscal year 2015-16 under “claims receivable from Customs” and thus, the said appellants have failed to prove that incidence of duty has not been passed on as they have not booked/ accounted for the refund claim amount in the relevant financial year. Thus, the claim of refund was rejected vide the order-in-original dated 16.02.2016 on two accounts, on limitation as well as on the grounds of unjust enrichment.

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Per contra, the Authorised Representative argued that after going through Section 18(2) of the Customs Act, it is clear that in case of provisional assessment, the party becomes entitled for refund only after final assessment because the provision of this section starts with “when the duty leviable on such goods is assessed finally.” It is again reiterated in Section 18 (ab) since, it states that amount paid shall be adjusted against the duty finally assessed. 

Authorized Representative further argued that the principal ground of the appellant is that the refund is allowable under Section 18 (2)(a) suo motu by the department and Explanation II to Section 27 is not applicable since Bill of Entry was provisionally assessed on 10.06.2006 and the provision of unjust enrichment was introduced from 13.07.2006. This argument has no force because  after going through Section 18(2) of the Customs Act, it is clear that in case of provisional assessment, the party becomes entitled for refund only after final assessment, as the provision of this section starts with “When the duty leviable on such goods is assessed finally”. 

Further submitted that in the instant case Bill of Entry for warehousing was provisionally assessed on 10.06.2006 Ex-Bond Bill of Entry was filed on 12.06.2006, the Bill of Entry was finalized on 15.03.2007 since some original documents were pending, so final assessment was done for the first time on 15.03.2007 which is certainly after 13.07.2006. The appellant did not become entitle for a refund on their filing of the Bill of Entry for warehousing but rather only after it was finalized, though even the first final assessment did not result into refund for the appellant. After the first assessment order, the appellant filed an appeal before the Commissioner (Appeals) which was allowed vide order dated 03.06.2008.

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The bench viewed that the Bill of Entry was finalized on 15.03.2007 and final assessment was done for the first time on 15.03.2007 after the cut-off date 13.07.2006, after which the doctrine of   Unjust Enrichment became applicable.The bench agreed with contention,  that the appellant did not become entitled for a refund on their filing of the Bill of Entry for warehousing but only after it was finalized. After the first final assessment order, the appellant filed an appeal before  Commissioner (Appeals) which was allowed vide order dated 03.06.2008. Therefore, assessee became entitled for refund as a result of the order of Commissioner (Appeals) dated 03.06.2008.

It was observed that the appellant was bound to get the refund application processed under Section 27 of the Customs Act. Since the appeal of the department was dismissed by CESTAT on 13.10.2015, the entitlement of the appellant to refund of duty paid got finalized only on 13.10.2015. Hence, the relevant date for counting the period of limitation is 13.10.2015. Refund application was filed on 30.11.2015 which is within the limitation period.

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It was submitted that the refund claim amount is required to be booked/ accounted for in the claims receivable in the relevant financial year and cannot be accounted for thereafter, during subsequent financial year. Once the refund claim amount has not been booked in the relevant financial year, the duty incidence is to be treated as passed on. Therefore, claimant failed to prove that the incidence of duty has not been passed on as they have not booked/ accounted for the refund claim amount in the  relevant financial year. Therefore, even compliance to the obligation of doctrine of Unjust Enrichment is not fulfilled. 

A single bench of Dr. Ajaya Krishna Vishvesha, Member ( Judicial)  viewed that when the Chartered Accountant has given a certificate after verification of accounts and corroborative evidences that the duty incidence has not been passed on to the customers then this certificate should not be brushed aside without any cogent reason and the lower Adjudicating Authority and the Commissioner (Appeals) has brushed aside the Chartered Accountant certificate without any cogent reason.  The tribunal set aside the order and allowed the appeal.

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